A national register of financial planners armed with a consumer-led rating system could and become a "game changer" for an industry that lacks transparency and has raised alarm bells for years.
The website, Adviser Ratings, is free of charge and includes the names and details of 18,000 financial planners to help track shoddy planners and identify good ones, similar to the way Trip Advisor works for hotels, restaurants.
That it will be launched by shadow treasurer Chris Bowen at the Association of Financial Planners conference on Tuesday will be interesting given one of AFA's members, Westpac's Bankers Trust, launched its own adviser register on Monday, Adviser View, which includes the name of each of their 595 bank advisers, a client satisfaction rating, education and experience.
It also plans to extend it to the other 667 advisers in its aligned groups, Securitor, Licensee Select and BT Select.
It will be fascinating to see whether others in the industry follow Westpac's lead, supplying information to the consumer-led Advisor Ratings website or whether they sit back and wait for the ASIC-run national register to go live next year.
Advisor Ratings, which is backed by former chief financial officer at Virgin Money Angus Woods and consumer advocate Christopher Zinn, says it has been welcomed by politicians, industry bodies, licensees, consumer groups and banks.
They may be right, but behind the scenes its arrival is causing a bit of a stir. For starters, it pre-empts the ASIC-run register which is currently being worked on by an industry group and is part of a deal the government struck with Clive Palmer to push through its amendments to the Future of Financial Advice reforms.
One of the professional bodies, the Financial Planning Association, which has a representative on the working group, recommends consumers look for a certified financial planner when using any form of adviser search register. "Over 20,000 consumers visit our website each month looking for a certified financial planner as the gold standard for advice," FPA chairman Matthew Rowe said.
The fact that sites like this are springing up is confirmation of how the financial planning sector is now on the public radar screen, in a way it wasn't before the CBA financial planning scandal hit the headlines after whistleblower Jeff Morris exposed the wrongdoings and management cover up to the Australian Securities and Investments Commission.
Morris makes an interesting point when he says the creation of the website could be seen almost as vigilante justice in that it seeks to fill a gap left by normal law enforcement.
Indeed, Labor senator Sam Dastyari, who has called a Senate inquiry into wrongdoings in the financial planning industry, says the fact that various registers are popping up reflects the need for better regulation in this space. "There has been a failure of government in this area," he said.
The parliamentary inquiry follows a set of hard-hitting recommendations in a separate inquiry in June, including a royal commission into CBA's financial planning scandal and a separate investigation into Macquarie Group's adviser business.
The scandals, exposed by a series of investigations by Fairfax Media, showed a gaping flaw in the system, including the absence of a central register where consumers could go to get information about a planner, including their education, work history, membership of a professional body or whether they had received a sanction or banning order from the corporate regulator.
Given the damning report by ASIC last week into the life insurance industry, which found more than 37 per cent of advice was in breach of the law, anything that helps lift the lid on the industry is welcome.
Woods says consumers will be able to jump on the website and add comments about their experiences with financial planners as well as rank them. The idea is that advisers who attract good rankings will attract more business.
Besides identifying good planners, the hope is it will flag those offering inappropriate advice given the number who slip through the cracks each year.
It will use the Rainmaker database to populate the information – then ask planners themselves to fill their profiles with more information about their education and work experience – and link it back to various announcements from ASIC. For instance, a financial planner working for CBA will have a red flag with a link to an enforceable undertaking with ASIC, which finished in October last year.
Westpac hired an independent verification agency, First Advantage, to independently verify its planners' qualifications before putting them on the website. BT boss Brad Cooper said in a statement: "We have outstanding customer satisfaction ratings for our financial advisers now standing at 87 per cent and I am more than willing to use this as an opportunity for our clients to judge us."
For shadow minister for superannuation and financial services Bernie Ripoll, the website and the ratings of advisers has the potential to be a "game changer" by providing consumers with visibility across the quality of advice provided.
It is an interesting concept and as Morris points out to what extent "self populating" by advisers will be abused. "Dodgy advisers are not known for outing themselves, on the contrary, they are known for talking themselves up," he says. But then again, anything that lifts the level of transparency has to be a good thing.
