Disclosure effectiveness in the financial planning industry

Abstract

Purpose Scandals in the Australian financial services industry highlight the conflicts of interest between those who provide financial advice (financial planners) and their clients. Disclosure is a potential governance tool to manage these conflicts of interest by reducing asymmetries in information. Yet, the efficacy of disclosure is questionable as scandals persist, so this paper aims to research the effectiveness of disclosure in financial planning. Design/methodology/approach This research used a qualitative approach involving the triangulation of data from parliamentary inquiries in financial services with data collected in semi-structured interviews with financial planning professionals. Findings The findings draw a clear portrayal of the disclosure requirements and illustrate how disclosure processes are onerous and complex. Starting with detangling the complex interactions between the beneficial role of disclosure in reducing information asymmetry and unethical behaviour and the detrimental effect of information overload, the authors then highlight effective disclosure techniques used by financial planners, including visualisation of material information. The study reveals that financial planners perceive their role as filtering information for clients and ensuring clients’ comprehension, due to the onerous disclosure requirements. Research limitations/implications The study is of interest to researchers, practitioners, policymakers and society as it implies that how disclosure occurs is as important as what information is disclosed. Those who wish to foster effective disclosure in the financial services industry need to consider the quantity, quality and process of disclosure. A limitation is the research focusses on financial planning practices and not client outcomes, which could be considered in future research. Originality/value The study adds to the understanding of how disclosure is used as a governance tool and how the quantity of information may impede the effectiveness of disclosure in the financial planning industry. In addition, the study identifies and elaborates on the influential factors and best practices for enhancing the disclosure effectiveness by financial planners.

Compatibility of the CSR practices of Islamic banks with the United Nations SDGs amidst COVID-19: a documentary evidence

“…Nowadays, a documentary method is widely used in the area of accounting and finance. For example, Richards and Safari (2021) used the archival data kept by Australia’s Parliamentary Joint Committee on Corporations and Financial Services and the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry with a view to assessing the extent to which financial planning is disclosed in Australia. Umar and Kurawa (2021) applied the documentary research method to justify the reasons why the awareness and knowledge of Islamic accounting standards for Islamic financial institutions are very low in Nigeria.…”

“…The study applied thematic analysis in the analysis of data. This method has now widely been used in qualitative research (Thaker, 2018; Rahman et al , 2020; Umar et al , 2020; Umar, 2020; Mahmood et al , 2021; Richards and Safari, 2021; Simon et al , 2021; Umar and Kurawa, 2021). The categorical themes and designed questions are shown in Table 2.…”

Striking a balance: Resolving conflicts of interest in Hong Kong’s insurance market

“…The absence of commission guidelines has resulted in non-standardized and undisclosed payment mechanisms and ratios in the insurance industry [17]. This lack of transparency not only creates conflicts of interest between clients and agents, but also disadvantages independent clients in terms of knowledge and protection [18]. According to a recent report by Hui [19], the total sales commission of the insurance industry in Hong Kong reached HK$61 billion in 2021, with the average annual commission for each agent reaching nearly HK$550,000, indicating the significant financial incentives that may influence agent behavior.…”

The professionalization of financial planning in Australia: an institutional logics perspective

“…Conflicts of interest are governed by banning commissions (McInnes, 2020) and through financial planners' disclosure to clients (Richards and Safari, 2021), and there has been little resolve to separate financial product providers from financial advice. One suggestion to resolve the issue of conflict of interest in financial advice has been to license financial planners individually.…”

“…This conflict of interest was epitomized in the agriculture managed investment schemes, where financial planners only had one product they could recommend to a client (PJCCFS, 2009a). Conflicts of interest are governed by banning commissions (McInnes, 2020) and through financial planners' disclosure to clients (Richards and Safari, 2021), and there has been little resolve to separate financial product providers from financial advice.…”