Australia is considering a new system under which 1,800 financial advice licensees will be rated, in a bid to rebuild consumer trust after several scandals with financial advisers in the country.
The new system, outlined in a white paper, will see licensees rated in two ways: the first using openly available or commercially procured data and the second using proprietary and qualitative information direct from the licensee.
The focus of the system’s methodology is to predict actions within a licensee that are detrimental to client’s interests, primarily misconduct.
Adviser Ratings, the company behind the proposal is already in consultation with government, regulators and industry to get the go-ahead.
It said the aim is to enhance the clarity and consistency of information used by consumers in selecting a financial adviser.
Adviser Ratings chief executive, Mark Hoven, said the destruction of trust in the financial advice industry is “deeply concerning” and that the new rating system for licensees is intended to differentiate the better service providers and “rebuild community faith in our industry”.
Hoven said the loss of confidence in institutional brands and the broader advice system “demands this kind of evidence-based, scientifically validated service”.
“We believe a summary indicator of adviser quality like a licensee rating based on a consistent and transparent methodology would vastly improve the way customers search for and track the ongoing status of financial advice providers,” he said.