In the best interest of clients? : a reappraisal of the recent reforms in the regulations of financial advisors in Australia

In 2008, the world’s financial markets were at the brink of "meltdown" and the value of investments across the global plummeted. This led to a massive loss in confidence around the world in the financial system. A survey conducted by the CFA Institute and Edelman involving a total of about 2,104 institutional and retail investors in the US, UK, Hong Kong, Canada and Australia showed that 35 per cent of investors rated "trust to act in my best interest" as the highest of out of the six identified factors when investors seek the advice an investment manager. Therefore, renewing investors’ confidence in the financial system and investment advisory services requires concrete and tangible solutions, in particular in ensuring that financial advisers act in the best interests of their clients. While improved market discipline and a professional code of conduct are critical elements in restoring investors’ trust, the introduction of statutory obligations will send a clear and positive signal that financial advisers must put their clients’ interests first and foremost.