Australia’s corporate regulator has railed against the financial advice sector, saying the industry had treated its clients appallingly and broken their trust.
Australian Securities and Investments Commission chairman Greg Medcraft says the pain inflicted by poor or unethical financial advisers on thousands of unsuspecting clients was heart-breaking.
“It’s absolutely broken my heart to see what financial advisers have done to people and what they often continue to do to people,” a visibly angry Mr Medcraft told the National Press Club on Wednesday.
Mr Medcraft said he’d seen many cases where people had been advised to move their money into completely inappropriate investment products, while others had no idea of the type of investments being made on their behalf.
“Australians want advice they can trust, it is absolutely appalling,” he said.
ASIC has come under fire over its failure to head off widespread problems in the Commonwealth Bank’s financial planning arm, where more than 1,100 customers lost their savings through poor advice.
A Senate inquiry earlier this year lashed out at misconduct and fraud within the division between 2006 and 2010.
Mr Medcraft also called for higher education standards for financial advisers, saying planners should be required to pass a university level exam.
The current minimum industry standard, called RG146, has been widely criticised as insufficient, though some wealth management companies insist on higher standards.
Meanwhile, Mr Medcraft renewed his calls for tougher penalties to deter white collar criminals.
“Australia needs penalties that will scare the pants off people,” he said.
He said convicted white collar criminals needed to be either sent to jail or handed fines that were significantly larger than they proceeds of their crime.
“Breaking the law in the financial sector seems to be a trade-off between fear and greed,” he said.
“We need penalties that amplify the fear and absolutely suppress the greed.”