The system to rank financial advisers would help consumers avoid the high cost of bad advice, says UNSW Business School Professor Jerry Parwada.
A plan to provide consumers with more reliable information about financial advisers: Professor Jerry Parwada.
Financial advice licensees would be assessed on things such as the quality of internal governance and whether authorised representatives had ever been banned, under a national rating system proposed by Professor Jerry Parwada from the UNSW Business School.
The system would aim to predict behaviour that was detrimental to clients, especially misconduct, giving consumers clearer and more reliable information to use when choosing financial advisers.
Professor Parwada is co-author of a white paper that outlines the proposal.
More than 1800 financial advice licensees would be subject to the system, he said, and would be rated in two ways: the first using public or commercially procured data, and the second using proprietary and qualitative information direct from the licensee.
“At stake is the threat to retail customers’ willingness to access financial planning services,” Professor Parwada said. “Recent studies show that even indirect exposure to misconduct destroys trust and results in non-participation.”
A key differentiator of the proposed rating methodology is that it will be backed up by a standing research capability designed to stress test the factors predicted to influence quality of advice as well as keep track of changing dynamics in the industry.
The new system, being promoted by Consumer group Adviser Ratings, will also help financial advisers conducting their own due diligence before switching dealer groups.
Mark Hoven, CEO Wealth of Adviser Ratings, said: “Adviser Ratings values the opportunity to be associated with such a high-calibre organisation as the UNSW Business School in developing its licensee rating system for the Australian financial advice industry. This is a nationally important initiative that will help build professionalism and recover trust with the community.”