Responding to former judge Kevin Lindgren QC’s call for legislation differentiating between independent financial advice and services offered by advisers licensed by major product manufacturers, a number of financial advice community stakeholders debated the issue on a LinkedIn forum yesterday.
Commenting on the social media thread, Michael Camm, managing director of Bendigo-based Genesys authorised representative firm Venture Financial Planning, questioned whether “yet another piece of questionable legislation” would be beneficial for the industry or consumers.
“The issue is not so clear cut,” Mr Camm said. “For all intents and purposes, I could call myself an IFA because I choose products for clients that are in their best interests from an extensive approved [product] list but I cannot call myself independent because AMP own[s] the dealer group that I operate under. So even though I would give “independent advice”, I would be regarded as a salesperson under the proposed legislation.”
Mr Camm explained that he has 22 years’ experience in the industry and is a Certified Financial Planner, indicating that these qualifications are perhaps more important than licence ownership.
Offering the contrary position, Shartru Wealth Management chief executive Rob Coyte said the introduction of legislation as proposed by Mr Lindgren would cut through some of the noise created by the FOFA parliamentary debate.
“Given a lot of the content around the debate with FOFA I think if this initiative was brought in then this would remove a lot of the need for discussion,” Mr Coyte said.
“I don’t think anyone is saying that the advice [offered by an institutionally-aligned adviser] cannot be sound it is just a matter of disclosure. If the licensee is a product provider then they are aligned ….its simple and clear cut.”
The call for a legislative distinction between restricted and independent advice – as implemented by the UK government in the Retail Distribution Review reforms – has gathered pace lately, with the SMSF Professionals’ Association of Australia calling for a licensing regime for independent advisers in its submission to the Financial System Inquiry.
Hewison Private Wealth director John Hewison, a former director of the International Financial Planning Standards Board, has also proposed a similar initiative in an ifa blog post this week.
Unaligned versus aligned….well I can tell you, at the moment I am unaligned but considering becoming aligned for various reasons. Funny thing is, when I mention that to my clients they are telling me they would feel more comfortable being under a big bank license anyway. Maybe it’s all how you say it….
Still doesn’t solve the cost and quality of advice problem though. The increased cost is through legislation and FoFA increased legislation..so work that one out too.
[quote name=”Les Batchelor”]The article did not ‘slag off at AMP’. Unfortunatly, and once again, the debate has ended up being planner versus planner. Dissapointing to say the least. Show some unity guys, level your frustrations at the shoddy job labour did of making financial advice cheaper and more accessable for everyone and lets work together to find the best outcome for advisers.[/quote]
I agree with Les. The ‘I’m more ethical than the next guy’ posturing between advisers is utterly self-defeating and will only further damage the reputation of our industry if it continues. Can’t we just accept that, within certain parameters, there are different approaches to doing business, and that’s ok?
I do agree you Country Bob. Not to mention the cost in preparing a rather large SOA for a rather small transaction is….ludicrous. I would actually be quite happy to go 100% dollar based and charge for services if the risk companies could reflect the commission rebate decently in the premium. The paperwork to do one simple task adds cost and someone has to pay for those costs. A $300 risk commission does not cover a 45 page SOA, 30 page CDF and a fight with compliance because a little disclaimer was left out.
The article did not ‘slag off at AMP’. Unfortunatly, and once again, the debate has ended up being planner versus planner. Dissapointing to say the least. Show some unity guys, level your frustrations at the shoddy job labour did of making financial advice cheaper and more accessable for everyone and lets work together to find the best outcome for advisers.
Yes Gerry, you are completely correct. It is sad that insurance commissions are still required to make the business viable. While we have done a lot to increase the dollar based fees we charge we haven’t reached the point where they alone are sufficient. Regular media reports and surveys suggesting that ‘advice’ should cost $300 don’t help. I would like nothing better than to dial down the commission on insurance to zero and still be able to pay my staff.
Country Bob…you take commission on insurance. Isn’t that fee based on premium size and not the work involved…or do you take that commission to subsidise your other costs? Surely the work involved in processing a $3000 annual life premium is the same as the work involved in a $300 annual life premium?
I am an AMP planner. In 20 minutes or so I’m presenting advice. The advice includes Catholic Super, OnePath and AMP trauma (yes, it is true that an AMP planner can recommend non-APSL product – shock horror). I charged an upfront dollar based fee and will receive commission (fully disclosed) on the insurances. I do not charge percentage based fees for upfronts or ongoings. I don’t care whether that makes me independent or not. I don’t charge someone more because they have more money. I charge depending on the work involved. The advice is in the best interest of the client. They know this is an AMP licensed office. We were disappointed when AMP made us take down our AMP signs which were huge! I am continually bemused by all the rock throwers in here who still charge percentage based fees and slag off at anything to do with AMP…… talk to me when you charge agreed dollar based fees and I might listen.
Hi Les, nothing wrong with your sentiments at all.
However, (and for what it’s worth) if independant advisers truly want to differentiate themselves from bank owned and so called ‘product floggers’, they must have no potential conflicts of interest i.e. institutional ownership.
Otherwise, the so called ‘independant’ adviser will continue to be subjected to negative scrutiny.
IMO, the distribution model we have today won’t change much unless there is a significant paradigm shift towards genuine independant advice and away from the product manufacturer owned distribution channel.
The tricky bit of course, is that a once significant non aligned planning group exits with a trade sale, guess who the buyers are.
Back to square one.
A test for any Genesys, or other insto owned dealer group, is why won’t you voluntarily put the logo of your ultimate owner on the front door?
In most cases the answer is because they don’t want to advertise the fact. Now why would that be?
Broker, I dont disagree with what you are saying. However we must be careful not to level the sights squarly on advisers, ‘Authorised reps are there to sell product. And the owners product is the ‘preferred’ option’ is an all encompassing comment, and a bit unfair. Journalists and online forums such as this thrive on throwing both qualified, and unqualified comments out to the masses and then sitting back and watching us tear each other apart. I’m just trying to drum up some unity and to move the focus to where it belongs…legislation, Bill Shorten lived up to his name and fell very short with the changes that were made. We live in an us versus them environment, there is enough abuse yelled over the fence by other market participants, I would be dissapointed to see brokers included in the mix.
lets simplify things, advice is all about strategy and the products used are the “tools” to make the strategy work-without incentive or bias or “kick backs etc etc-you are a planner. if you think you are a sales person – then that’s what you are.
Hi Les,
Of course, very few can take the high moral ground on this issue. Self interest pervades the financial services industry.
I’m just saying that if you’re part of an institutional machine, you have to accept the tenet that the owners interests are always in the mix.
Further with the number of EU’s that have been handed out in recent years,to some pretty big players, client interests haven’t always been at the forefront.
[quote name=”Broker”]The whole point of vertical integration for upstream suppliers (read product manufacturers such as AMP), is to supply (and sell) those products & services to an end buyer with a minimum of those pesky ‘hold up’issues.
For what other reason do downstream service providers (dealer groups) exist from an institutional owners perspective?
Authorised reps are there to sell product. And the owners product is the ‘preferred’ option.
If you take the Kings’ shilling, at least be honest about it.[/quote]
Broker? and people in glass houses……
The whole point of vertical integration for upstream suppliers (read product manufacturers such as AMP), is to supply (and sell) those products & services to an end buyer with a minimum of those pesky ‘hold up’issues.
For what other reason do downstream service providers (dealer groups) exist from an institutional owners perspective?
Authorised reps are there to sell product. And the owners product is the ‘preferred’ option.
If you take the Kings’ shilling, at least be honest about it.
Well done Richard, I’m self licensed and my AP is relativly short compared to others. The focus should be taken away from advice, and what products are on the AP, its all about disclosure.
Richard, fair enough, but that doesn’t mean there aren’t dodgy incentives to sell inhouse for planners that aren’t as professional as you. You have to factor in the lowest common demoninator – they are the ones that give the rest of us a bad rep.
So how extensive is an APL for an IFA. With so many products in the market place I would be surprised the the APL of an IFA included all. The APL for my aligned dealer group is very extensive and investment selection within each of those products also is extensive. If you want the best returns for your client then sometimes you may have to select more expensive investment options. There is an old adage that you pay for what you get. Cheaper is not always the best. Good financial advice is about how good the strategy is and the management of that strategy through the process. I have always had the belief that independent advice is about the advice not the product.So aligned or not advisers should always select the products that they believe provide the best outcome for their clients, and to me that is in itself will over time create a self aligned bias.
I’m an independent adviser, but I think the well intentioned push to distinguish aligned from non-aligned will simply backfire in the court of public approval, inadvertently damaging the integrity of all parties, yet again. Let’s improve disclosure and keep things positive.
One point missed is the AMP APL is NOT independent and whilst you may give “Independent” advise – the legislation states otherwise. Yes- the definition is too restrictive and there are many of us who are NOT aligned but operate under a dealer group-we miss the boat on independence as such My dealer group is as open as you get and without any inducement for product and is as close as you get to be independent without being self licenced. So, if an APL is open and only highly recommended or recommended product is used, no bias or inducement-this a starting point for an objective discussion. Or let the exodus begin to self licencing-all in the name of “independent advice”
Its a complex issue Mr Camm, my strong feeling is that those among us that have both significant time in the industry, and the appropriate qualifications, must step up to set an example and to offer leadership by example. I see your point and at the same time find myself somewhat confused as to what an approriate outcome might be. Its time for level heads and (moderated) serious consideration. Lets hope that those that will ultimatly make these decisions apply all of the above. I also think that its past due that those that have opinions on these complex issues stop hiding behind pseudonym’s (guilty)and take responsibility for our comments.