The Australian Securities and Investments Commission's (ASIC) shadow shopping survey on superannuation advice shows that planners have improved their performance in the past couple of years, but more improvement is needed.

According to ASIC Chairman Jeff Lucy, many planners have lifted the quality of advice to clients, but they still have significant work to do before it is consistently at a level that ASIC and consumers regard as acceptable.

The survey – to assess whether financial advice given after the introduction of Super Choice was up to scratch – shows the cultural changes mandated by the Financial Services Reform Act (FSRA) are not happening quickly enough.

Mr Lucy says 16% of the advice was deemed not reasonable, given the client’s needs, and another 3% was probably not reasonable.

Conflict of interest has been a contentious issue in the planning sector for some time, and the survey shows that planners with conflicts are more likely to give unreasonable advice than those without.

In fact, planners with conflicts of interest were three to six times more likely to give unreasonable advice.

ASIC says conflicts are usually created when the adviser stands to get higher remuneration if the recommendation is followed or the recommended product is associated with the adviser’s licensee.

The survey – which assessed 306 examples of advice to consumers by 259 individual planners (or 102 Australian financial services licensees) from June to December last year – revealed a wide disparity in quality.

ASIC says the advice ranged from highly sophisticated at one end, with basic but valuable in the middle, through to negligent and inappropriate at the lower end.

Mr Lucy says the most positive finding related to strategic advice. This covered issues such as asset allocation, super contributions and tax advantages.

When consumers were advised to switch super funds, one-third of the advice lacked credible reasons as to why the switch was occurring and risked leaving the consumer worse off.

Another issue raised in the survey was that in 46% of cases planners didn’t give the client a written statement of advice. But in one-fifth of those cases, verbal advice was given to stay in an existing fund.

In response to the survey findings, ASIC will conduct specific follow-up action with 14 licensees.

The Financial Planning Association and the Investment and Financial Services Association (IFSA) say the report is largely positive, with far more clients satisfied with the levels of advice compared to ASIC’s 2003 shadow shopping report.

“The finding that 5% of consumers were dissatisfied with the advice that they received is a dramatic improvement on the 2003 survey,” IFSA CEO Richard Gilbert said.

“A ‘reasonable basis for advice’ finding of 81% is also a dramatic improvement since the last survey in 2003, where 51% of the advice provided was described as ‘borderline, poor or very poor’.”

Mr Gilbert also says the survey is proof that the FSRA is working for consumers. He says financial services regulation has “come a long way in the past decade”, and the industry is experiencing “significant upward shifts in the quality of advice”.