Calls for protection against unqualified financial advisers

In a submission to the Senate Economic References Committee's hearing into Mass Marketed Tax Effective Schemes, the FPA said that one of the fallouts from the tax effective schemes debacle was that investors were not aware of the professional status of the advisers they were dealing with.

FPA Senior Public Policy Manager, Mr Con Hristodoulidis, said that the restricted use of the descriptions "financial planner" and "financial adviser" under the Financial Services Reform Bill (FRSB) would enhance consumer protection.

He said in the FPA's experience, the most concerning behaviour related to instances where scheme promoters appointed representatives with restricted authority to sell schemes such as the tax effective schemes.

These so-called advisers had little training and even less accountability.

Under the FPA proposal, investors could be certain that they were dealing with qualified financial planners or advisers who were subject to regulation and who met minimum education and professional standards.

They would also have recourse to various dispute resolution channels including the Australian Securities and Investments Commission, the Financial Industry Complaints Scheme or in the case of FPA members, the association's disciplinary procedures.

In its submission dealing with Mass Marketed Tax Effective Schemes, the FPA was critical of the Australian Taxation Office (ATO), saying it had lacked vigilance and had been harsh and unfair in its treatment of investors involved in such schemes.

Mr Hristodoulidis said the ATO should have published its determinations much sooner so that investors were not caught unawares.

He said the ATO had remained silent on these issues and given the impression that it tacitly approved the way in which the tax laws were being interpreted.

The FPA believed that it was inappropriate to impose sanctions against qualified financial planners or advisers who operated within the Corporations law and who followed defined guidelines in recommending investments.

Mr Hristodoulidis said the ATO's retrospective judgements had reduced investor confidence.

Other FPA recommendations included:

- A call for an amnesty for investors who had been issued reassessments by ATO prior to 1998.
- Tighter registration of prospectuses and the re-introduction of pre-vetting of factual information by ASIC, including risk versus reward requirements.
- A boost for consumer education about good investment principles.

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