In an email addressed to “all politicians” and obtained by ifa, the Association of Independently Owned Financial Professionals (AIOFP) has not only reiterated its plea for an end to vertical integration but has also underscored the need for a simultaneous reduction in Canberra’s involvement in financial advice.
“Dear parliamentarian, the time has arrived to eliminate vertical integration in the financial services industry,” the email begins.
“With the banks leaving financial advice after failing consumers for decades with the structure, it should now be a path of minimal resistance to eliminate the ‘sacred cow of conflicted, anti-consumer behaviour’ in financial services.”
The AIOFP further asked the parliamentarians to consider factors such as the findings of the 2009 Ripoll inquiry into the Storm Financial collapse, which advocated for the elimination of all conflicts in financial services.
“The same intention was declared by former Treasurer/minister Frydenberg in 2015 and promised by royal commissioner Kenneth Hayne in 2017–19 but the profoundly conflicted vertical integration advice business model has somehow survived despite its well documented detrimental effects on consumers,” the AIOFP said.
The body attributed this persistence to political donations by institutions aimed at safeguarding their “favoured business model”.
“Vertical integration being permitted to exist when product commission was banned under FOFA in 2012 is an idiosyncrasy that should not be allowed to exist – it is however a testament to the power of political donations,” the AIOFP said.
“Now that most institutions have been embarrassed out of advice by the royal commission findings and most have recently declared they are not ‘venturing back into advice’, now is the time to ban vertical integration [but grandfather existing operators]. It is also time for Canberra to retract its massive overreach into the advice industry over the past 14 years, this intrusion has now come to the point where operating a profitable advice business is becoming problematic.”
The AIOFP argued that “both issues need to be addressed simultaneously to ensure sufficient independent advisers remain in circulation to assist consumers”.
Expressing concern over the potential financial strain on advisers and the impact on consumers, the AIOFP warned of advisers adjusting their business models to maintain profitability.
“The recent Dixon Advisory collapse is a prime example of advisers venturing into the manufacturing space to capture margin but lacked expertise leaving a $332 million black hole for their clients. The Dixon executives clearly did not have the manufacturing expertise, they should have just stayed with advice,” the AIOFP said and urged Canberra to recognise the overwhelming dominance of the independent advice sector.
“It is time for the financial services industry to be clearly divided into product manufacturing or advice and the unfair legislative shackles on advisers over the past 15 years removed,” the body pleaded.
Lastly, the AIOFP called for the complete repeal of the vertical integration legislation to protect consumers from a future change of mind by the banks.
“This instance of history repeating itself must be avoided at all costs, both issues need to be addressed simultaneously in Canberra and there is no better time to do it but now.”
I wonder why we never hear this type of talk from the FAAA?
“but grandfather existing operators” hahaha
Have you already forgotten that politicians don’t know what the word “Grandfather” means?!!! They stole all of the contracted previously “grandfathered” trail from us that was considered as “property” by the Australian Attorney General and protected under the constitution which is what he told old Shorten …… “the vibe” if you will.
Canberra dont care they haven’t even started to legislate phase 1 of qoar. All just gaslighting while they increase tax on super, implement csolr on advisers and increase the Levy. Promoting a reduction from an increase which had previously been frozen for a tax which doesnt exist in other country in the world for advisers is a great example
Only AIOFP is working towards everyone
AIOFP and the FAAA need to call out the corruption at ASIC. A $46,000 fine to a Super fund (Hesta) for false and deceptive advertising over incorrect returns, clearly demonstrates the corruption within the Finance Industry. Yet an Adviser with a Defective FDS or someone like Sam Henderson gives out a defective FSG or Dover and it’s all over. Seems like Vertical Integration is seen as an important source of revenue that suits the sitting Government of the day.
AIOFP should also argue that vertical integration of manufacturers into the advisory sector reduces competition between institutional manufacturers of platform administration products, once longer-term clients are ‘captured’, which was found by the Hayne Royal commission by manufacturers charging ongoing advice fees to those who had already died (blaming advisors again). This is not the only serious competition issue, which affects Australian consumers dependent on financial products, to which Honourable Lawmakers need a wakeup call.
Wishful thinking AIOFP – you can “urge Canberrra” all you want but like all of the political power that we have had in the past – Albo, Jones, ASIC & Treasury will do what will benefit them. I wouldn’t want to waste any time negotiating or waiting for them to see our point of view as they have already been in power for 18 months and achieved nothing. Just vote them out, move them on and get all of your clients to do the same. They have treated us all with nothing but contempt and have not earned any benefit of any doubt. It is already past time for action, forget all of the promises before the election – how long and how much trust do you want to give them???
Wiped 10 years of bad Coalition experience, then?
Really tired of politicians constantly placing their snouts in the feed-trough.