Adviser Ratings has established an external governance committee (EGC) to oversee a new rating system in light of recommendations made by the banking royal commission.
The independent rating service of financial advisers said the licensee rating system is an industry-led initiative to be launched later this year that will support current and future legislative requirements and assist consumers, advisers, industry and regulators in differentiating between over 2200 licensee businesses comprising 27,000 financial advisers.
The ratings will also provide intelligence for product manufacturers under the Design and Distribution Obligations and Product Intervention Powers Bill currently before parliament, which has garnered bipartisan support.
The bill would mean manufacturers will have a greater shared responsibility with the advice channel to ensure consumers’ best interests are served.
The ERC will report directly to the board of Adviser Ratings and will be chaired by professor of finance and former UNSW Business School head of banking and finance Jerry Parwada. She led the development of the original terms of reference for the rating system through engagement with industry, regulators and government last year.
Other members include former Australian Securities and Investments Commission (ASIC) deputy chair Peter Kell, former Standard and Poor’s global head of credit ratings Paul Coughlin and former Aon Asia-Pacific chief investment officer Janice Sengupta.
Commenting on the formation of the ERC, Parwada said: “The royal commission advocates for increased information disclosure, however, the challenge for consumers is processing this deluge of information. This necessitates a carefully thought out and regularly updated summary measure of quality.
“A key differentiator of the proposed rating methodology is that it will be backed up by a standing research capability designed to stress test the factors predicted to influence quality of advice as well as keep track of changing dynamics in the industry.”
The ERC will be supported by an expert panel that may grow over time as evolution of the sector demands new specialist experience.
The inaugural expert panel members include Deloitte governance, regulation and conduct partner Dr Deen Sanders, Encore Advisory Group director and chief executive Tom Reddacliff and Western Sydney University School of Business academic program, accounting and financial planning director Dr Michelle Cull.