BFO response to FSI Report
The Banking and Finance Oath - response to Financial System Inquiry Report
The Banking and Finance Oath Board (BFO) today made the following statement in support of the Financial System Inquiry report released on Sunday 7 December.
The Banking and Finance Oath Board (BFO) wishes to congratulate the Financial System Inquiry (FSI) panel on their recognition of the importance of the right kind of culture that puts consumer interests at the forefront of decisions made by financial services providers.
Ethics are at the crux of this conversation at both the product issuer and adviser level.
In particular, the BFO supports the notion of better ‘true to label’ general financial advice definitions highlighted in the report. In addition, the BFO supports the need to elevate the education and qualifications for financial advisers, urges policy makers to consider ethics as part of any minimum requirements and agrees on the need for ongoing professional development to include ethical requirements to complement the increased focus on standards of conduct and professionalism.
Fair treatment of consumers was recognised by the FSI panel as a fundamental characteristic of an effective financial system. In a speech this week, the chair of the FSI panel, David Murray said the financial services industry must take more responsibility to understand the type of consumer that would best suit their product, the type of information they need and whether advice in relation to that product is needed.
In order for this to occur, a fundamental shift in the way financial products and services are brought to the market is required. Product and service issuers will need to ask themselves, what is appropriate for different sections of the community? With the first part of this analysis being, what is the right outcome for the consumer? This will require ethics to be brought into each part of the product development and distribution process.
The FSI panel also recommended that product issuers put a process in place to review existing products to ensure they still meet the needs of the target market and whether the products’ risk profile is consistent with its distribution. The BFO believes that this review process should involve the introduction of a matrix, which begins from an ethical rather than a profit or compliance starting point.
Finally, the BFO notes the example of Opes Prime highlighted in the report, as one where complex securities lending arrangements were not understood by consumers. The BFO believes investor awareness and a higher standard of ethics are pre-requisites for ensuring issues such as this will not be a problem in the future.