The second matter that emerged in connection with the provision of financial advice is that clients have often been given poor advice that has left them worse off than they would have been if proper advice had been given.

I repeat what I said in the Interim Report.[1]

Hindsight will always show that some advice an adviser gives a client turns out to have been disadvantageous. Advice that is given about financial products or investment will not always turn out for the best.

Not all advisers (financial or other) are equally skilled or diligent. In some cases, reasonable advisers may form radically different views about what should be done.

Nothing can be done to change these outcomes. But recognising that there will be unforeseen and unwanted outcomes and recognising that some advisers will not be as skilled or diligent as others cannot be permitted to obscure some large and deep-seated issues.

The cases of ‘inappropriate’ advice considered in the course of the Commission’s work called attention to four recurring points:

  • advisers proposing actions that benefited the adviser;
  • advisers proposing actions that benefited the licensee either with whom the adviser was aligned or by whom the adviser was employed;
  • advisers lacking skill and judgment; and
  • licensees being unwilling to find out whether poor advice had been given and, if it had, to take timely steps to put it right.

The first two points, about advisers proposing actions that benefited either the adviser or the licensee with whom the adviser was aligned, direct attention to the conflict between the adviser’s duty to the client and the adviser’s interest.

[1] FSRC, Interim Report, vol 1, 138–9.