Financial planners’ soft commissions – including overseas holidays, cash payments and cars – are under fire again. An Australian Securities and Investments Commission (ASIC) investigation of 40 firms found that many sales incentives are not being properly disclosed to customers despite the introduction of the Financial Services Reform Act (FSRA) in March.

ASIC Executive Director for Enforcement Greg Tanzer said although a number of planners should be commended for explaining benefits in consumer-friendly language, other firms continue to leave clients in the dark with disclosure that is “vague or non-existent”.

“If advisers accept benefits with the potential to influence their advice, the law requires they clearly disclose these conflicts of interest to clients,” he said. “Consumers need to know if their adviser is in a position to give impartial advice, as this may affect their decision on whether to act on the advice.”

Kerrie Kelly, CEO of the Financial Planning Association (FPA), says planners need to take on the findings from the ASIC report and move to adopt the best practices. But she is quick to defend FPA members, saying the association has been working with ASIC to ensure planners are up to standard.

“Last December, the FPA published jointly with the Investment and Financial Services Association (IFSA) a draft code of conduct on alternative remuneration (soft dollar payments) which has received FPA member feedback and will be adopted as part of the FPA’s Code of Professional Conduct,” she said.

Ms Kelly said that although disclosure is “not yet uniformly high” the FSRA has made a big improvement in standards.

IFSA CEO Richard Gilbert says his association is committed to the transparent disclosure of financial products. “IFSA and the FPA started work on this task in mid 2003, before ASIC’s research began,” he said.

The news follows a difficult 18 months for the FPA. It included an ASIC investigation which found more than half the planners examined had not provided clients with quality advice.

ASIC says it will consider introducing formal surveillance of planners next financial year.