While consumers are responsible for the consequences of their financial decisions, they should be treated fairly. The financial services and products they purchase should perform in the way they are led to expect.
Recent history provides a number of examples of product and advice failures. While the circumstances of each case differ, problems have arisen when commercial incentives have overridden consumer interests.
We will do more to lift the standards of financial advisers, including by placing this activity on a professional footing for the first time. Following extensive stakeholder consultation, we will introduce legislation to make the issuers and distributors of financial products accountable for their offerings. This will ensure a stronger customer focus in product design and marketing. The new product design and distribution obligation will be principles-based rather than prescriptive and should be viewed as workable by the industry. Extensive consultation will be needed before these changes are implemented.
We will consult with stakeholders on the development of a new ASIC product intervention power that could be used to modify products, or if necessary, remove harmful products from the marketplace.
We will address the misalignment of incentives by reducing and improving the disclosure of conflicted remuneration in life insurance, stockbroking and mortgage broking.
We will also introduce legislation to facilitate innovative disclosure. This will help to unlock the productivity benefits that technology has to offer.
- By end-2015:
- Develop measures to address the misalignment of incentives in life insurance.
- By mid-2016:
- Develop legislation which provides a professional standards framework for financial advisers. Consult on development of accountabilities for issuers and distributors of financial products and ASIC product intervention powers.
- By end-2016:
- Develop legislation to give ASIC the power to ban individuals from managing financial firms. Consult on strengthening ASIC’s enforcement tools in relation to the financial services and credit licensing regimes. ASIC will review remuneration arrangements in the mortgage broking industry.
- Beyond 2016:
- Consult on and develop legislation to enable innovative disclosure for financial products and to improve the regulation of managed investment schemes. ASIC will review stockbroking remuneration arrangements.