Jeffrey Lucy, ASIC chief, has defended the regulator’s ‘shadow shopper’ surveys as one of the most effective ways of creating “a positive momentum for industry improvement”

In a speech to the third national of congress of Consumer Affairs Victoria last Friday Lucy said ASIC recognised the importance of financial advice and was interested in lifting industry standards and not just punishing poor behaviour. “I do want to stress, however, that ASIC’s commitment to funding these surveys is not only to identify problems in the market for advice – as some industry players might have you believe – but also to give us a platform from which to promote continuous improvement in the advice industry,” he said. Findings from the regulator’s latest ‘shadow shopper’ exercise – targeting advice on superannuation – which were originally scheduled for release last December will not now be available until April. An ASIC spokesperson told Investment & Technology News last week that “logistical problems” were delaying the release of the survey results. After talking up ASIC’s role in cracking down on soft-dollar commissions and influencing the Financial Planning Association’s new rules on conflicts of interest, Lucy said the regulator was committed to reducing “unnecessarily burdensome or complex regulation”. He said ASIC has supported the Federal Government’s Regulation Taskforce, whose findings have not yet been made public, and is keen to cut red tape where it can. As well as putting unwarranted pressure on business, over-regulation, Lucy said, “can also lead to suboptimal outcomes for consumers, who will ultimately bear the cost”. Lucy said the Westpoint collapse has also highlighted the lack of understanding among many consumers about the nature of financial risk. “Consumers are not homogenous and they do not always act rationally. In my view, however, they are likely to fall into three broad categories: • those who are financially responsible because they choose to be, probably labeled the ‘conservative’; • those who are ‘gamblers’ and pursue inappropriate risk-taking behaviour; and • those who fall somewhere in between – possibly financially literate, but with a tendency to either act on impulse or accept, without question, advice provided to them,” he said. ASIC is planning to commission market research to test Lucy’s hypothesis about these types of consumers. He said the regulator has also written to all financial planners who received commissions from Westpoint and relevant industry bodies urging “prompt, fair and effective” resolution of consumer complaints. Lucy told the conference that ASIC would also monitor how the Financial Industry Complaints Service (FICS) manages the Westpoint consumer backlash. “In my view… the Westpoint collapse presents something of a test for the dispute resolution sector, which is ultimately funded by industry representatives,” Lucy said. “It is the first large systemic event affecting a single dispute resolution scheme. We will work closely with FICS over the coming months.”

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