IAM going to have a big week ahead ;) Nice article : [ATTACH]...

IAM going to have a big week ahead

Nice article :



NEWS / FINANCIAL PLANNING
Majors should bolster advice governance

Former FPA chief executive Mark Rantall.
19 Oct 2016


Major financial institutions needed to strengthen the governance processes they had in place to uncouple financial advice from product distribution if the industry was to rebuild public credibility in the face of scandals at the major banks, according to former FPA chief executive Mark Rantall.

Speaking at yesterday’s SuperRatings and Lonsec Day of Confrontation, Rantall said many of the financial sector’s current issues stemmed from confusion, both internally and among the public, as to where products ended and advice began.

“Inherent conflicts of interest in the industry are a big issue – it doesn’t mean we should necessarily look at legal separation of product and advice, but what it does mean is a conscious move towards both culture and corporate governance structures that facilitate that,” he said.

It was important board directors set in place mechanisms that would value the role of professional advice in itself within their institutions, rather than structuring advice as an arm of distribution, he said.

“There are ways to separate advice and any product recommendation that may be coming from that, because there does not have to actually be a product recommendation,” he said.

“I’ve operated in systems where you can separate the corporate governance structures to protect the independence of the adviser to give professional advice that is solely in the best interest of the client.

“The second component of that is getting the culture right – the whole organisation from the board down must respect the professional nature of advice, which may or may not include a product recommendation.”

Apart from top-down initiatives, such as establishing independent boards for an institution’s advice companies that sat outside the main board, he said it was also important performance management tools such as balanced scorecards had compliance gates in place to prevent advisers from being rewarded for advice that was skewed towards internal product sales.

While the gradual uncoupling of advice from product sales might lead some banks to consider exiting the market, that was unlikely to restrict consumer access to the industry, he added.

“Traditionally in all sorts of areas [of financial services] there has been a degree of cross-subsidisation, but regardless of what organisations do or don’t do [in future], I believe financial planning is robust,” he said.

“It will evolve and modify into whatever it needs to in order to continue to service the clients that it does today.”