FUTURE OF FINANCIAL ADVICE REPORT
INTRODUCTION:
The Australian financial industry underwent a comprehensive overhaul in the administration of both financial based products and services introduced in July 2012 under guidelines referred to as the Future of Financial Advice Reforms, (Van Eekelen, 2014, p. 1.6). All avenues involving the dissemination of financial advice to clients have been affected by the new compulsory guidelines since July 2013. Under new guidelines, financial advisors need to maintain the highest standards of professionalism when soliciting investment advice that is readily available and contains reliable information demonstrating awareness for client diversity within the financial services industry, (Home: Future of
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The affected reforms include adherence to compulsory regulations involving best interest duty and the prohibition of illegal remuneration between parties who are deemed to have an influence on the final outcome of a particular financial product and service, (FOFA: The Nuts and Bolts, n.d). Both reform components, including the provision of scaled advice to clients, will be discussed in detail below.
BEST INTERESTS DUTIES:
The dissemination of personal advice involving financial products and services provided to a client from a financial advisor is referred to as best interests’ duties. During consultation, financial advisors need to demonstrate a comprehensive understanding of a client 's current situation to ensure their long term financial goals are fulfilled. Appropriate advice, clarification on information deemed to be either absent or incorrect and prioritising client needs must be adhered to at all times. Advisors are able to recommend a suitable financial product or service after undertaking further investigation on a client. Subject to passage of legislation, additional forms of financial advice after initial consultation have been removed since June 30th 2014 and are not mandatory until after December 31st 2015, (FOFA: The Nuts and Bolts, n.d).
ILLEGAL REMUNERATION PRACTICES:
Financial advisors accepting remuneration that influences the overall outcome with client recommendation of financial advice or products constitutes a significant breach of
I strive to provide my clients with the best possible investment advice and service by employing proven investment strategies and techniques in order to achieve superior investment returns over the long term. I keep my business simple and straightforward in order to ensure that clients understand and easily participate in our ongoing
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Notably, PS 7.5 places great significance on the on financial planner’s duty of loyalty towards their client and the “not to profit without informed consent rule”. (Australia, 2013) (Government, 2011) Mr Nguyen and Mr Gillespie consistently generated excess individual profits through the intentional disregard of their client’s involvement. PS 7.6 deals with the suitability of services rendered towards the client’s specific wants and needs. The high degree of commonalty exhibited in the risk profiling of their clients expresses the lack of professionalism shown by Mr Nguyen and Mr Gillespie, as well as an evident conflict of interest. The actions of Mr Nguyen and Mr Gillespie are also in direct violation of the rules relating to PS 7. Both parties actively engaged in fraudulent behaviour, consistently deceiving and misleading their clients, in order to gain financially (Adele Ferguson, 2013).
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The general objective of this policy paper is to deeply understand the latest and most influential financial reforms and the current financial environment in U.S through relatively comprehensive analysis with regard to the Dodd-Frank Act. In doing so, I move forward to provide some suggestions on improving the relevant legislature.
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