"The financial advice industry should immediately adopt a 'Royal College' method of affiliation, with membership governed by a peer-based qualifications assessment and disciplinary mechanism," suggests Professor Jerry Parwada from the UNSW Business School.
"Licensees and other key industry participants should get on the front foot with signing up to such a model after the BRC, leaving Parliament with the job of formalising it through legislation."
He makes the suggestion after the inquiry into Australia's scandal-plagued financial sector proposed sweeping changes in an attempt to end rampant industry misconduct.
Professor Jerry Parwada says the industry culture needs to change. "I get the impression the sense we have seen the elephant in the room – it is a sense of impunity, by the banks. They think they are untouchable."
He notes the toxic culture of the industry, particularly a sales orientation the Royal Commission tries to redress. "We need to resolve the culture of impunity. It is not a secret that the financial planning industry has a formidable sense of self-confidence about misconduct being part of 'business as usual' because of the tacit approval or inertia of policymakers to pass effective legislation about excesses."
He adds that both the major political parties must remain entirely neutral when it comes to lobby interests in the financial services industry. "This is critical to allowing for true professionalisation to take root in the financial advice industry without interference from politically powerful interest parties. Without such an undertaking, chances are that once the dust settles, the culture of impunity will set in again. We'll then be back to square one, and we'll have another Royal Commission a decade down the track."
The Banking Royal Commission spent 12 months investigating wrongdoing by some of the nation's biggest financial institutions. Much focus centred on customers who had been exploited - and some left financially ruined - by banks and industry advisers.
Because of this, he says we need to educate the 'end user' about information they get – in other words the customer. "Many highly intelligent financial planning customers have no idea how to make sense of the vast amount of 'information disclosure' they get about financial product and service providers, but that's critical to the effectiveness of any disclosure regime."
He feels the Royal Commission doesn't address tools to support financial advice customers, about licensees, the state of advice providers, and how to even get really independent advice, as opposed to advice that is effectively a sales tactic.
"The effectiveness of the BRC recommendations depends on the ability of customers to understand and act upon information from the disclosure requirements, the receptiveness of the industry to a centralised disciplinary body, and ultimately the overall culture of the industry," he says.
"How the industry and Government deal with these three issues will determine whether the intentions of the report are realised in the long run."
For further comment contact Professor Jerry Parwada on 0422 983 244 or firstname.lastname@example.org
Media contact: Julian Lorkin: 02 9385 9887