In an email to the AIOFP, seen by ifa, ASIC senior executive leader Joanna Bird said Section 923A of the Corporations Act currently only protects the words ‘independent’, ‘impartial’ and ‘unbiased’.
Advisers are prohibited from using these words unless they reject commissions and gifts from product providers and operate without any conflicts of interest.
“In the past, ASIC has taken the view that it will administer s923A on the basis that licensees and their authorised representatives can use the term ‘independently-owned’ even if all the conditions in s923A are not met,” Ms Bird said.
“However, given the increasing importance of this issue, we have decided to seek external legal advice.
“If that advice suggests that the use of the term ‘independently-owned’ can only be used if all the conditions in s923A are met, we will communicate this publicly and to the AIOFP’s members, and allow sufficient time for licensees and ARs to amend their websites and documents.”
Speaking to members, AIOFP executive director Peter Johnston said he hopes this topic will be qualified by the group’s national conference in the Gold Coast next month, where Ms Bird will be speaking.
He added that it was legal for advisers to call themselves members of the AIOFP (Association of Independently Owned Financial Professionals).
“Our previous legal advice has been stating you are a member of the AIOFP has been compliant and does not contravene the Act,” Mr Johnston said.
“An interesting area is where practices are technically ‘independently-owned’ but the advisers are licensed to an institution. [This] is an anomaly that needs to be looked at to avoid further confusing consumers.”
Earlier this month, ifa reported that ASIC had penalised Findex for using the words ‘independent’ and ‘non-aligned’ on its website.
A Findex spokesperson later told ifa that the company had only described itself as ‘independently-owned’ and ‘non-aligned’ in order to convey that its business is majority owned by management and staff, and not by a bank or other financial institution.
I own my own practice with another adviser. I am the Responsible Manager of my own AFSL.
It is a statement of fact that my practice is independently owned. It is a statement of fact that my practice is independently licenced.
ASIC’s problem is the words independent, unbiased.and impartial so under advice we have removed them. We are “privately owned” and we are “directly licenced” with ASIC. Go figure
The flawed AFS Licensing system has caused confusion for consumers regarding who is independent and who is not. The licence lumps all business models under the same system and calls it securities and product advice, and by default every business receives commission unless they prove otherwise.
The confusion is not only among clients. My PhD pilot study finding suggests that advisers themselves are confused too.
Angelique, it shouldnt be too hard for advisers to work out. If your licensee is owned by one of the Big 6 (Banks, AMP & IOOF) then you institutionally aligned. Those that dont know this are either just lying to you or themselves or shouldnt be in the industry if they truly dont know.
C’mon, just write the article for what it is – “In an email to the AIOFP, seen by ifa” – translated the AIOFP has been busily lobbying ASIC to try an ensure no one else can use a term that they’ve put their business name. Maybe everyone else should rename their business to include the term “independently owned”.
You are only truly part of an independently-owned group if they are; 1) not owned by an institution; 2) they charge a flat fee, no matter how much FUM; and 3) do not receive any income by way of white-labeled products or volume based remuneration from a restrictive APL. These AFSLs are few and far between.
Are they going to apply the same rules to politicians?
Wow. ASIC has officially gone rogue! This confirms it. Their priorities are so far out of whack with community expectations, it is scary.
“Independently Owned” is an irrefutable statement of fact for our practice. Yes, we hold our ARs through a bank owned AFSL but are not beholden to the house product instead operating from a large and diversified APLwith no pressure or incentive to recommend the Bank. At last check only 2 clients had exposure to any of the AFSLs product.
We are different from a tied bank or industry fund adviser who largely exist to promote the house product.
Our clients are not stupid and understand the term “Independently Owned” and we make no secret that the Bank owned AFSL financially stands behind our advice which, for our clients, is perceived as a strength.
So if not “Independently Owned” then how do the PC brigade propose we explain ourselves when the truth could somehow seem misleading?
You cannot possibly mount any sort of sensible argument if you are aligned to an institutional group that you are ‘independent’.
You are paying a subsidised dealer fee by way of restricted APL. How about paying a reasonable dealer fee and having an open APL?
What is in this arrangement for the bank then? Thye take the risk of licensing you – and receive nothing in return? Doesn’t seem right
How about ASIC make the banks and other big financial institutions and their multitude of dealer groups with different names, VERY CLEARLY state they are owned by the banks, etc. have this front and centre of all marketing. As we all know the institutions go to great length to hide the true ownership of these advice groups.
eg. [b]Hillross is owned by AMP.
Garvan is owned by MLC that is owned by NAB
Shadforths is owned by IOOF
Financial Wisdom is owned by CBA[/b]
That will solve a lot of confusion in the Advice world.
Yep, ultimately this is the sort of info consumers are looking for. Advisers advertising themselves as “independently owned” or “non aligned” are simply trying to communicate that they are not institutionally owned like the ones you mention above, plus Millenium 3, Charter, Magnitude, Securitor, Bridges, etc.
ASIC’s strenuous efforts to prevent non aligned advisers from differentiating themselves from these institutionally owned groups is just playing right into the hands of the institutions, and making it harder for consumers to make an informed choice. (Similarly to how an incomprehensible legalistic multi page SoA makes it harder for consumers to make an informed choice). Why is it that so much of what ASIC does ends up making consumers worse off?
I know the Philip Carmans of the world will retort that the easy answer is to fully comply with the ASIC definition of independence. But that means taking away the option for consumers to pay for insurance advice in a more cashflow effective manner via the commission system. And removing that option from consumers also makes many of them worse off.
Show me a planner who constantly bangs on about their “independence” and I’ll show you a planner who doesn’t have a genuine value proposition.
Wow, Philip Carman….you would have to be one of the funniest guys on the face of the planet….you are literally hilarious….its is just so incredibly funny the things that you say and come up with because it would be next to impossible for anyone else to be as clever or witty as you….just a crack up.
Well, no wonder that last one was sent by someone who remains “anonymous” – it’s also outrageous! Change the Act to suit your needs/wants rather than to reflect the truth…
Reg is right. Unless you own your AFSL you are working under the direction of someone else and are clearly not independent. The old regime (from the 1980s) was better: Advisers Licences for those remunerated ONLY by invoice – i.e totally fee for service paid by the client and Dealers Licences for those getting paid by third parties (including AFSLs) and taking it further, if you aren’t an adviser you cant use the words “advice” “adviser/or” and “advising” anywhere in your material. Not even in a Statement of Advice, which would be Statement of Dealing.
The problem with this industry is that what is actually selling is disguised as advice and the only thing that “anonymous” got right is that consumers don’t fully understand. Remove the words connected to advice from those not qualified (i.e. have their own AFSL) and the problem is fixed and all consumers would understand that they are not being advised but sold to. ASIC will then determine who is capable of providing advice and remove licences where necessary. No other industry/profession is as fraught with conflicts as ours and it needs to be fixed once and for all.
Finally! Independent should mean that you have your own AFSL – full stop!
‘Non-institutionally owned’ is another that needs investigating. There are licencees promoting this with the intention to be seen as not owned by the 6 majors. However they still run a vertically integrated business with their own funds management business and badged platforms et al. I would call that an institution just a smaller scale and is entirely against the principles of independence the advice industry is trying to promote. It is these weasels that manipulate legislation that need to be named and shamed and weeded out.
As you say, the reason they use these terms is to be seen as not owned by the 6 majors. Why do they do this? Because that’s what consumers want!!
“Independently owned”, “non aligned” etc are just shorthand ways to communicate to consumers in a language that means something useful to them. It has nothing to do with weaselling, or any form of deception. Everything that ASIC does to enforce its utopian definition of “independent” is preventing consumers from easily locating advisers not controlled by the big 6. It is preventing consumers from accessing affordable insurance advice via the commission system. In short, ASIC is yet again making consumers worse off.
The legal advice they should be seeking is how to change the Corps Act definition of “independent” to something that is actually meaningful and beneficial to consumers.
I hear what you say, but my point is not to do with the independence, it was about those licencees that are not owned by banks but are still vertically integrated institutions. I was with one, they had a funds management business and platforms badged of which both they receive a clip of the ticket. Their APL is structured to corral you towards these products. This is pretty similar to an institution. They act and have a structure the same as an institution but say they are non-institutional – that’s the misleading part for a consumer whether the adviser is independent or not.