MIS agri scandal reveals sector-wide flaws


By Sarah Kendell

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The Senate report into the failure of agribusiness managed investment schemes (MIS) has highlighted how the entire financial services industry, not just the adviser channel, is failing consumers and in need of reform, according to the FPA.

FPA chief executive Dante de Gori told financialobserver the fallout of failed agribusiness schemes pointed to systemic problems in many areas of the industry, making it impossible to lay the blame solely at advisers’ feet.

“There were many areas where people were let down in terms of the whole process around products, tax deductibility, the incentives, the lending – the whole spectrum of things,” de Gori said.

“It demonstrates the financial system in total has let these consumers down, and it is incumbent on all of us to do it right and correct those mistakes.”

De Gori said although the advice industry was doing its part through contributing to legislative reform and improving standards to try to minimise poor outcomes for consumers, focusing solely on financial planners would not fix all the problems stemming from institutional failures such as agribusiness MIS and the CommInsure scandal.

“Advisers have been held up over a long period of time as being the scapegoat for a lot of things that have gone on, and in some cases that is justifiable, but in the case of both agribusiness MIS and CommInsure there are also other gatekeepers in the system that are involved,” de Gori said.

“Leadership by government, regulators and all the associated businesses in the financial services system has effectively failed in its protection of consumers.

“We believe financial planners can play a strong role in terms of improving Australians’ financial wellbeing, but what is everybody else in the industry doing?”

The FPA expressed its support for a large slice of the report’s recommendations, handed down in the past week, including a more aggressive government plan to improve consumer financial literacy levels, stronger legal obligations on analysts and research houses to act honestly when reviewing products, and renaming ‘general advice’ as ‘product sales’ to eliminate consumer confusion that such statements took individual circumstances into account.

Moreover, the association supported increasing ASIC’s powers to ban advisers and product manufacturers engaging in misconduct, and the development of a compulsory code of adviser conduct.

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