The Australian Consumers’ Association (ACA) has criticised the Investment and Financial Services Association (IFSA) and the Financial Planning Association (FPA) over the conflicts of interest issue, saying the two organisations should stop “claiming disclosure is the answer”.

In a letter to the Australian Financial Review last week, ACA CEO Peter Kell says IFSA and the FPA “conspicuously fail to grapple with the issue that prompted this letter – the payment of ‘shelf space’ fees by fund managers to financial planning dealer groups”.

Mr Kell says these payments are “part of the structurally embedded conflicts of interest in the financial services industry that time and time again have been shown to harm consumer interests”.

He says this point is highlighted by the Australian Securities and Investments Commission in its recent paper on conflicts of interest.

“And it’s about time that these organisations stopped claiming disclosure is the answer,” he said. “Do they seriously believe that consumers can properly interpret disclosure about the potential conflicts of interest generated by shelf-space arrangements alongside all other information they must digest? Who really benefits from this approach?”

The FPA recently issued a list of principles to members to help them comply with their obligation to manage conflicts of interest.

Some of the new principles came into effect at the start of this month; others will come into effect over the next two years.

The first principle requires the cost of financial planning advice to be separately identified as an advice fee in the statement of advice and total fees paid for ongoing advice to be disclosed regularly – preferably annually.