A SWEEP by the corporate regulator has uncovered "disappointingly high" levels of poor quality advice provided by financial planners.
As a war of words continued yesterday over the federal government's planned reforms to financial advice, the Australian Securities and Investments Commission released the first results of a "shadow shop surveillance" of advisers undertaken last year.
ASIC, which used real consumers seeking retirement advice to carry out the sweep, revealed that of the 64 advice plans provided, more than a third were rated as poor, 61 per cent as adequate and just 3 per cent - two of the 64 plans - were classed as good.
The ASIC commissioner, Peter Kell, said there was a "consistent failure" by advisers to talk to clients about what their retirement savings could realistically fund, with many plans containing "woefully inadequate projections" and "poor or unrealistic" technical assumptions. There was too much generic advice, Mr Kell said, and conflicts of interest remained a problem.
ASIC announced the results at a parliamentary committee hearing reviewing the government's proposed Future of Financial Advice laws.
The laws, sparked by investment collapses such as Storm Financial and Westpoint, will require financial advisers to act in their clients' best interests, ban conflicted payments such as commissions, and strengthen the regulator's power to refuse or cancel financial services licences. The government says the reforms will increase consumers' access to advice. But industry groups warn that the associated costs of the reforms, $700 million according to the Financial Services Council, will make advice less affordable and result in large-scale job losses in the sector - as many as 35,000, the Association of Financial Advisers has said.
But this figure was labelled "silly" by the Treasury official Jim Murphy in yesterday's hearing.
He pointed to research by IBIS that adviser numbers would grow by 2 per cent by 2015.
Research by Rice Warner that was cited by the government last year showed that 6800 planners would leave the industry by 2024. But Mr Murphy said a study commissioned by the Industry Super Network had factored in a ban on insurance commissions, which did not eventuate.
Industry groups, including the Australian Bankers Association, the Financial Services Council and the Association of Financial Advisers, have pressed for changes to the proposed laws, and for their introduction to be delayed by a year to July 1, 2013.
The opposition has attacked the present laws for imposing "excessive and unnecessary" red tape.
Much of the contention centres on a new "opt in" requirement, under which advisers have to send clients a renewal notice every two years, as well as a new requirement to send clients an annual statement of fees charged and expected to be charged.