The regulator overlooked the issue in its release of Future of Financial Advice regulatory guidance this week, despite some worrying activity in the market, Synchron director Don Trapnell told ifa.
“It is our understanding at least one institutional licensee is actually offering reductions in dealer fees to any adviser who writes 80 per cent of their business with a life insurance provider from within the same network,” Trapnell said.
“Here we have financial advisers who are being given a very strong financial incentive to place the majority of their business with one life insurance company, irrespective of their clients’ needs and irrespective of the merits and features of the product,” he added.
Describing this practice as “absolutely wrong” and “conflicted remuneration in purest form,” the director of the 200 adviser-plus licensee said regulation of this space was needed.
“ASIC should step in and state that there should be no formal favour between life companies and recommendations from licensees,” he said.
Rather than any deliberate omission from the guidance, Trapnell said he thinks the issue of vertical integration is just “not on ASIC’s radar”.
“If ASIC was aware I imagine they’d say it’s not right,” he said.
Vertical integration is the elephant in the room when it comes to conflicted remuneration and more importantly conflicted advice. Its not possible ASIC is not aware of the elephant but as the problem is too big and too entrenched to the benefit of of the powerful bank lobby the elephant rermains in the room. Government and ASIC point at the mice they are busy removing from the room but we all know conflict free advice is harder to find than ever.
Sadly ASIC and the government don’t really care about this issue at all.
Add this that to the fact that ASIC and the legislation are completely comfortable with manufactures owning adviser groups and can’t see any conflict issues. Best advice for a client is best product from your parent/owner/manufacture is completely acceptable. It is an intended consequence. Go to a bank planner, get a bank product and its your best interests out the window.
Conflicted rem is fine by the way if you are bribing voters in Western Sydney or Promising roads and hospitals to Independent MP’s – In fact they should not be called that at all.