The Federal Government has announced an inquiry to examine the role of Australia’s financial advisory sector, and commissions paid on investment products.
The inquiry, which has been launched by Labor MP Bernie Ripoll, is in direct response to the collapse of Storm Financial, which had 13,000 clients and $4.5 billion under advisement when it was placed in receivership in early January.
“When ordinary people – mums and dads and consumers – have their life savings ripped away from them, I think it’s our job to do something about it,” Ripoll told The Australian.
“I think the time is right now to have a very close look at what has led to these circumstances.”
The committee of inquiry will look at the way marketing and advertising campaigns for financial advisers and products are conducted, the way commissions and other fees are paid to advisers, and whether investors are being properly informed about risk factors.
The inquiry is expected to focus on the collapse of Storm and margin lender Opes Prime, which was placed in administration last year after its lenders withdrew their support for the company.
The Corporate Governance Minister Nick Sherry, the Opposition and the investment services industry have all pledged support for the inquiry.
But Queensland Liberal Senator Ian Macdonald and NSW National Party Senator John Williams have criticised the terms of reference of inquiry and want it expanded to look at the contribution banks made to the collapse of Storm.
“Any inquiry that doesn’t allow a look at the banks really won’t get to the bottom of it,” Macdonald said last night.
The senators say they will launch a separate Senate inquiry into the Storm collapse if they are not successful in their bid to have the terms of reference expanded.
The committee will report on 23 November.