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Financial advisors to face stringent regulations
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25th May 2006 
 
 
CEO of the Bank of Queensland (BOQ), David Liddy, today, told business professionals that the finance sector should face the same stringent regulations as the banking industry, to ensure it continues to meet the high standards set by the banks in Australia over the last 50 years.  
 
Presenting at the Institute of Chartered Accountants Queensland Business Forum, Liddy said that much of the wealth and prosperity of Australia in the second half of the 20th Century could be put down to its robust, competitive and extremely strong banking sector.  
 
"However, while the banks are regulated, regulated and then, just to be sure regulated again, there are still situations in the mortgage broking and financial planning industries that seem to sail blissfully on, tickled but barely touched by the regulation stick, causing problems such as the WestPoint debacle," Liddy said.  
 
The challenges faced by banks not only includes domestic and international competition, meeting the changing customer needs and global economic impacts, but they also face rigorous regulations from the government and regulators.  
 
"This means looking at ASIC, APRA and the RBA and how they are managing the momentum, which has gathered in the finance sector over the past five years," Liddy said.  
 
According to Liddy, whether it is the RBA's treatment of interchange fees, APRA's proposed treatment of capitalised software or the challenges of capital treatment under BaseI II, there are three questions that should always be asked when introducing new regulation, these include:  

  • Does it lead to better protection and information for shareholders?
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  • Does it lead to better protection and information for customers? And
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  • Is the cost to those shareholders and customers commensurate with the benefits?
 
"It is necessary that the regulations introduced actually achieve community demands and do not just introduce the burden of more red tape and heightened costs for business processes, after all it is the consumer who ends up wearing the costs'" Liddy said.  
 
Simon Grant, the Queensland General Manager for the Institute of Chartered Accountants agrees with Liddy saying that the financial sector should face the same regulations as imposed on the banking and accounting industries, as many of the mortgage brokers, real estate agents and financial advisors who are out there offering advice are not necessarily qualified.  
 
"After all regulation is introduced to protect the consumer and shareholders, it is important that the regulation extends across the whole financial sector in order to prevent consumers from receiving questionable advice that they often do not have the skills set to determine as questionable," Mr Grant said.