In a statement, ASIC announced it has updated its regulatory guidance to include restrictions on the use of terms implying independence, which were first outlined in June 2017.
Under the new guidance, the use of the terms ‘independently owned’, ‘non-aligned’ and ‘non-institutionally owned’ will be restricted under the Corporations Act.
“We want to ensure that those providing financial services to consumers are accurately describing their services,” said ASIC deputy chair Peter Kell.
“Consumers should not be misled into thinking a person is free from conflicts of interest solely because they use terms such as ‘independently-owned’.”
The regulator noted that the six-month “facilitative compliance period” for those using these terms but don’t meet the new standards will end on 31 December this year.
The confirmation of the changes comes despite lobbying efforts from various sectors of the industry, including the AIOFP, and Minister for Revenue and Financial Service Kelly O’Dwyer telling ifa the government is “open to listening to industry” on the issue.
Brett Walker of SMART Compliance previously told ifa that advisers who do not meet the definition of independence may be able to use alternative phrases, such as “able to select financial products and strategies without being told what to do by a product issuer”, but added these too may be restricted in the future.
Add the winners are …… consumers and the IFAAA. Good work.
Let’s go to the High Court, this is against the Vibe, it’s unconstitutional and DOES NOT deal with Independantly Owned AFSL’s on Just Terms.
Will it now be illegal for an adviser to suggest a client look them up on the ASIC adviser register, if it demonstrates that adviser has no institutional ownership or control?
This is a good point. My ASIC Adviser Register entry correctly shows my AFSL is not controlled by any organisation. Am I allowed to promote this? If so, are their any words left in the English language that I am allowed to use?
Surely this must be the moment when ASIC has “jumped the shark”. Making it illegal for an adviser to factually state they are not institutionally owned, due to the completely unrelated issue of them allowing clients the potentially beneficial option of paying by commissions? That passes neither the pub test, nor the basic tenets of law and language.
ASIC was asleep at the wheel during the Storm and CBA fiascos, and ever since then has been trying to redeem themselves by overzealously restricting the behaviour of licensed financial advisers. Some of their actions have been beneficial and long overdue, but many have been excessive and misplaced. As a result they have nudged many consumers into far worse options such as junk insurance and property speculation. One hopes that this dark period in ASIC’s history will end with the departures of Medcraft and Kell, and the new Chairman acts quickly to undo the damage of their excesses. Otherwise a royal commission into ASIC is needed.
Flock ’em, I may remove it from my website but I will still keep telling clients the truth, that our business & our own AFSL is privately owned and non-institutionally aligned. Love to see the mofo’s take a well funded group to court over this, any sane judge would throw the whole farcical crap out
Great, now let’s see ASIC(k joke) enforce ISA to fully disclose to members how they are completely vertically integrated, and full of conflicts of interest between their own greed, providing union slush funds, and Labor ‘donations’. Oh that’s right, they won’t and never will with their current toxic leadership and culture.
I thought the regulator enforced the law NOT made it. If not aligned to the NOW big 6 why not state it, if you OWN your own business why not state it. If the only reasonable method to get paid is by commission from whoever why not state it. There must be someone or a group with a brain that can solve this BS issue. Someone with caugillies- balls – has the answer. FIIK. Someone is in bed with someone.
If ASIC is trying to prevent anyone who has a conflict of interest from using the term “independent”, then that precludes any adviser who receives any form of remuneration. Even IFAAA members have a commercial conflict of interest, as they have an incentive to provide services that are unnecessarily complex or time consuming in order to generate additional fees. (SMSFs being the classic example).
Members of the IFAAA can call themselves independent…and I bet that is just eating you up inside right now isn’t it…
I think anyone with a modicum of ethics and integrity would be angry that IFAAA members can exploit a govt loophole to line their own pockets, while putting many consumers in a worse position.
What do you mean IFAAA members have a commercial conflict of interest – that is plainly false and as to exploiting a govt loophole that is also rubbish.
They have a conflict the same way that surgeons and lawyers do. It is in the commercial interests of a surgeon to operate even if the prospective patient doesn’t need an operation. It is in the commercial interests of a lawyer to prolong a case rather seeking a quick resolution so they generate more billable hours. It is in the commercial interests of a financial adviser to recommend an overly complex solution to generate higher adviser fees. All professional service providers have conflicts of interest, including those who are paid exclusively by fees.
Why do you keep saying “recommend an overly complex solution”? Who does this? As an independent we provide advice, provide a service and charge a flat fee for it. No need for smoke or mirrors.
Disgusted by this comment. You accuse IFAAA members of lacking ethics and integrity because they rebate commissions on insurance. ASIC has confirmed that % of FUM is still okay and you can call yourself independent but comms on insurance is not. IFAAA members don’t agree with this, but that’s how it is.
How dare you call into question our integrity when you are too gutless to put your own name to your comment.
Not because they rebate commissions. Because they don’t give the client the [b]option[/b][i][/i] of paying by commissions, even in cases when it would make it easier for that client to get the insurance they need at a time in their life when they don’t have the cashflow to pay the extra costs of upfront insurance advice.
And because IFAAA members claim that their refusal to allow clients the option of paying by commissions makes them “conflict free”. Fee for service advice is still conflicted. Yes, that conflict can be managed through ethics, professionalism and BID. Just as the conflict associated with insurance commissions can. The presence or otherwise of conflict has nothing to do with how the client chooses to pay. It is inherent in all commercial professional services.
Matthew— I’ve found your stance “”interesting””…and like your spirit. so to understand more I had a quick google prior to posting and I was wondering why are you a member of the FPA when the FPA gets bribes/payments/commissions from product manufacturers, such as AMP, Bridges CBA etc via the “”professional partner program””. A membership fee that is bundled up and hidden on their balance sheets. What is the difference between a commission paid to a financial planner from OnePath and a Bribe/Payment from OnePath to the FPA ? What does say the CBA/AMP for example hope to get from the FPA that they couldn’t achieve themselves by liaising directly with the Government. How do you feel about Institutionally aligned advisers paying a lower fee than what you paid, just because they work for say AMP? Are these payments that the FPA receives left over from the 80’s and nothing more than a commission payment?
Have to agree with Matthew Ross here – how dare you you question the integrity of IFAAA members who are probably the only members of this sordid industry who can hand on heart say are doing the right thing.
Our clients fortunately have the cash-flow to pay for our advice and ultimately end up paying 25% less than your clients for insurance.
Don’t understand why you haven’t got the courage to use your own name. I don’t consider anything that you are saying slanderous.
So I’m a self-licensed, privately owned professional firm that has no rebates on volume and no association with product manufactures but because I receive an insurance commission I can’t say I’m not ‘non-aligned’ to anyone? How offensive!
Yet an employed planner in an aggressive, product flogging Industry Fund is allowed to use the term ‘INDEPENDENT ADVICE’. An accountant, whose only product is their own, in-house, SMSF service can also promote themselves as ‘INDEPENDENT’. Not to mention newsletter floggers who seem to get away with murder. Apparently you can flog whatever conflicted product you like, as long as you don’t get a ‘commission’. How can ASIC be so stupid? Unbelievable!
So true. How can Union Super Fund advisers, with only one product to sell, be independent? When will ASIC do a review of the advice from Union Super advisers to see how many people end up in a Union Super super fund? If the numbers arent above 90% i’ll eat my shorts….
How can any adviser recommend the crap insurance cover that is prevalent in most Union Super Funds? How is it in the clients best interest to have cover with crappy definitions, high premiums, subject to change at any time the trustee feels fit, and at risk of not being ‘at work’ on the day the fund changes insurer? ASIC, please explain.
We have reached a sorry point in our planning history when a privately owned firm can’t call themselves “non institutionally owned”” . A firm that has it’s own license, has no ties to a bank or AMP and has an open APL list. And that same firm competes with an AMP owned firm that has a very small AMP logo on page 4 of their website and receives free marketing support, a free website, discounted software programs, heavily subsidized business costs, and guarantees to buy their business back upon the owners retirement…. Thank you FPA for your hard work. It’s clear that relationship with the banks via professional partner program is working well for you.
And when has it been ASIC’s job to make the law? Their role is to regulate within the terms of legislation. It’s the parliament & the courts who determine what the law is. ASIC should fund a test case if they want to do this, like the ATO do when they want to prove a point of law in the courts.
Very good point – and not a very well written article. S923A considers “restricted word or expression” (being independent, impartial or unbiased) AND “any other word or expression specified in the regulations” at 923A(5)(a)(ii). So amending the regulations gives them this power.
Insto’s win again. What a shock!
Let’s continue to befuddle the poor consumer so they can be given so called informed choice.
ASIC could adopt the ATO like position on such issues and support a Court sanctioned process where a genuine independent arbiter makes a binding determination based on well prepared case law and precedent. However that would require a level playing field and equally funded presentations. A result may not arise to the Minister’s expectations and needs.
Corey Bernardi, can you help?
Please anybody but that grub Bernardi. Why is he even still allowed to sit in the Senate? Elected as a Liberal Senator and quits almost as fast as Fraser Anning from One Nation to start his own party. No guts or morals to quit and restand in his own right, just another pollie addicted to the gravy train with his snout stuck firmly in the trough. He’s just a parasite on democracy.
Minister for Revenue and Financial Service Kelly O’Dwyer telling ifa the government is “open to listening to industry” on the issue. – Rubbish
I would suggest planners tell their clients & their local members of parliament that the present Government has stated that it is illegal to call yourself “”non-institutionally owned”” …I’m sure the common voter would equate this to being in the pockets of the big banks…. #crushingsmallbusiness
“We want to ensure that those providing financial services to consumers are accurately describing their services,” said ASIC deputy chair Peter Kell.
SO ASIC, WHY AREN’T YOU MAKING ALL THE INSTITUTIONALLY OWNED DEALER GROUPS CLEARLY STATE ON ALL MATERIAL, SoA’s, WEBSiTES, CARDS, ETC THAT THEY ARE OWNED AND RUN BY A BANK OR INSURANCE COMPANY.
ASIC, YOU ARE SO OWNED AND CONTROLLED BY THE BIG INSTITUTIONS IT’S FARCICAL.
AND O’DWYER, PLEASE GO BACK AND WORK DIRECTLY FOR NAB, AS YOU CONTINUE TO ACT AS IF YOU DO WORK FOR THE BANKS.
Fact, clients don’t care
Fact, clients don’t know.
Nothing wrong with ASIC restricting advisers from “implying independence” when they are not independent. Using institutionally controlled brands such as Charter, Hillross, Financial Wisdom, Securitor and Shadforths would be an example of such behaviour, and it will be interesting to see how ASIC enforces this restriction.
Unfortunately ASIC goes further than this, and uses a perverted interpretation of the word “independent”, to preclude payment methods such as commissions. How an adviser gets paid has nothing to do with independence. Anyone who gets paid any amount by any means for providing a commercial service receives conflicted payments. Demonising commissions as a payment method just makes it harder for people to get affordable advice.
How can a regulator make it unlawful to make a statement of fact? If I tell a client my business is privately owned, that is factually correct, regardless of what inferences ASIC may be concerned a client might read into it. What’s more, it would be interesting to see if ASIC would win a legal challenge over this. So, rather than making it easy for clients to distinguish between institutionally controlled advice firms and those NOT in this category, this law actually makes it more difficult for the public. The cynic in me suspects an element of collusion in this.
Agree. I wonder if ASIC will take people to task if they advertise or disclose on their websites that their AFSL isnt owned or controlled by a bank, fund manager or insurance company? That our business does not receive product overrides? That all insurers (from 1st January) all pay the same comms, so there is no preference as to who we recommend apart from what’s best for our clients?
Because it’s what the statement of fact is trying to do, and it’s generally not being transparent. Product conflicts are not limited to the institutionally owned. Similar to Mr Walker’s suggestion about alternative phrases which may be banned in the future. If they may be banned in the future then this might say something about the intent and transparency of these phrases, so why would you contemplate using them. ASIC has better things to do than waste their time on those who are doing the right thing, but it’s these types of approaches that create the need to keep ASIC going on this stuff. Instead of complaining, be transparent and get on with it.
“Product conflicts are not limited to the institutionally owned”. Quite true. That’s why independence should be defined in terms of “no in house product”. Whether that in house product is an SMSF administered by your practice, a dealer group SMA, or the insurance product of your licensee’s ultimate owner.