A recent survey conducted by the corporate watchdog found that only 3% of financial plans were ‘good’ for clients. 
The Australian Securities and Investment Commission (ASIC) reviewed 64 financial plans targeted at retirees or pre-retirees and outlined their findings to the Parliamentary Joint Committee on Corporations and Financial Services last week, on the upcoming Future of Financial Advisor (FOFA) reforms.
“Retirement-related advice has produced disappointingly high levels of poor quality advice,” said ASIC commissioner Peter Kell. 
So why did the industry rate poorly?
Mr Kell said planners failed to paint their clients a realistic picture of how supportive their retirement savings would be to their lifestyle.
Whilst 61% of the reviewed plans were deemed ‘adequate’, Mr Kell said that much of the advice given was too generic for clients.
Additionally, conflicts of interests continued to be an issue for the industry. “Often a client will go to see an adviser wanting to know when they can retire and instead leave with a new accumulation product,” Mr Kell said. 
In the public hearing, Mr Kell also added that 35% of retirement-related advice was poor. In response, the Financial Planners Association (FPA) said in a written statement:
“This underscores the critical importance of the need to continue raising the professional standards of financial planners, and restricting the use of the term ‘financial planner’ so that only those who meet certain levels of ethics, qualification and professional standards can call themselves as such”. 
What’s to come: FoFA 
ASIC's 'shadow shopper' survey comes ahead of the Future of Financial Advice (FoFA) reforms. From July, there will a ban on conflict remuneration structures such as commissions and volume payments for recommending particular investment products. Planners will be legally obliged to place their clients’ interests ahead of their own.
Each year, clients will need to opt-in to continue receiving advice – a reform opposed by the FPA. Percentage-based asset management fees will only be charged if the client agrees to pay them on ungeared investments. 
Trail commissions will be banned from July 2013. These are payments made by customers of large super funds to financial planners, although many of these customers don’t receive the financial advice. Trail commissions comprise around 35% of revenue for the financial planning industry.
Whilst the FPA broadly supports the reforms, CEO Mark Rantall highlighted the need for greater study on the reform’s potential costs to the industry.
How can you spot a good financial planner?
If you think you need some professional advice, you should start your search at the FPA.
In terms of qualifications, look for a Certified Financial Planner (CFP) that has a post-graduate degree; this is the highest standard and is a globally-recognised qualification. All financial planners must hold an Australian Financial Services Licence that’s issues by ASIC.
Be sure they are permitted to give advice about a range of financial products, and that they have a good track record in giving advice when the economy has slumped. Some advisors are specialised in certain areas, so that could be a better option for you if you’re concerned about a particular issue, such as self-managed super.
Even though the FoFA reforms are on their way, it’s still important to find out who the planner works for and ask them outright what agreements they have with product providers. This should be detailed in their Financial Services Guide. If you want purely impartial advice, pay on a fee-for-service basis so that you can receive advice from your planner but buy the investment products yourself.
-- By Stephanie Hanna