On Wednesday, ASIC issued a shock “clarification” that advisers that do not meet section 923A of the Corporations Act can no longer call themselves ‘independently-owned’ or ‘non-aligned’, regardless of relevant ownership structures.
Following the announcement, ASIC has begun its enforcement activity on this issue, extending its focus even to use of the word “independent” in seemingly benign contexts.
A letter from ASIC senior lawyer Helen Yu to a non-aligned advice practice, obtained by ifa, raised concerns with the use of the term ‘independent’ in relation to the firm’s external research process, rather than its business or remuneration model or licensing situation.
“We have since become aware that [your] website uses the term ‘independent research’ to describe the process of providing advice,” Ms Yu wrote.
“Our view is that ‘independent research’ is a restricted term under s923A … the term ‘independent research’ is of like import to the term independent, so is restricted in the same way as ‘independent’. We consider that ‘independent research’ could mislead and confuse consumers into thinking that the advice firm is completely free of conflicts or influence.”
The statement that ASIC took umbrage with simply read that the firm uses “independent research” to support its financial product recommendations.
Ms Yu insisted that the firm remove the term from its website and inform the regulator once their demand has been met.
The letter comes as the FPA and AFA express very different public reactions to ASIC’s updated guidance, while members of the non-aligned community begin lobbying for repeal of s923A.
Not only does s923A state:
” any other word or expression (whether or not in English) that is of “like import”….
It also restricts….” a reference to a word or expression being ” assumed” or used as part of another word or expression or in conjunction with other words, letters or symbols” !!!
So ASIC are spending valuable taxpayer funds on investigating words of ” like import”, whether some words could be ” assumed” to mean other words and looking for parts of words or symbols representing certain words that may be construed as leading a consumer to believe that even through the advice process, full disclosure of fees and remuneration basis is discussed, documented and clarified, the consumer is still at risk of confusion !
If the research used is not owned, controlled, collated or constructed by the advice practice or AFSL, then the research IS independent.!
The quoted statements by Helen Mu and the vitriolic stance that ASIC are now taking against advisers is now at breaking point and exemplifies the relentless and targeted offensive on financial services over a number of years.
This is no different to the misaligned and conflicted ASIC Report 413 where they went looking for a pre-determined answer and created the parameters to achieve the intended outcome.
And the deafening silence from Kelly O’Dwyer clearly indicates she is supportive.
I agree entirely. The bastardisation of ASIC Report 413 was outrageous. It all started with ASIC’s press release where they failed to mention the review was targeted at suspected churners (ie. advisers with high volumes of new business, following collaboration with life insurance companies). You had to read the full report to get that information. The report was insightful and important, but it should never have been extrapolated to the majority of advisers with normal volumes of business, which is exactly what the media, the institutions and politicians did in the months that followed. If that wasn’t bad enough, get ready for another kick in the guts. Check out ASIC’s consumer information on life insurance:
http://www.moneysmart.gov.au/insurance/life-insurance
When it comes to financial advice, this is what they tell consumers – ‘Read ASIC’s report, Review of retail life insurance advice, to learn what ASIC found about the quality of life insurance advice from finanical [sic] advisers’. If you click the link you are given the choice – the press release or the full report. I wonder what the average consumer would read?
The ACCC should be applying the Effects Test to s923A of the Corporations Act and determining the detrimental impact on small business and the potential for misuse of market power from institutions in the event this section is not altered. This is clearly anti-competitive.
Is this a case of aligned advice firms (hillross, charter, Garven as an example) just trying to claim they are not attached to their owner by saying they subscribe to independent research houses ? If so then ASIC could have a fair point.
From a legal point of view (boo..boo..I know!) it does appear that the financial advice provider forms their recommendations first then shops around for the research to back them up. Why couldn’t ASIC assist them with less ambiguous wording rather than take the stick to them?!
Ridiculous! If it’s clear from the context that the ‘independence’ referred to is that of a third party (i.e. the research provider) then how can that be considered a statement about the independence of the advice provider??
This is so tangential to the actual issues in the profession that it’s hard to imagine how the latest spate of activity on 923A fits into any coherent strategy for regulating financial advice.
There is a coherent strategy. It’s just not in the interests of consumers.
The strategy is to make it as had as possible for regulated advisers to do business, and force consumers to get their advice from unregulated sources like accountants, real estate agents and junk insurers. That way ASIC can’t be blamed for failing to properly enforce regulations, as they did with Storm and CBA. Many more consumers will get ripped off than ever before, but ASIC will be able to dodge blame for it.
Helen Yu and her ASIC colleagues clearly need to properly learn the English language, before they start imposing their damagingly incorrect interpretations on consumers.
They also need to learn that “conflicted remuneration” is a tautology. All remuneration is conflicted, no matter what the payment method. ASIC is just wasting taxpayers money and causing ever more harm to consumers by imposing ridiculous rules to remove “conflicted remuneration”. The focus should be on managing conflicted remuneration. The best way to do that is with a statutory Best Interests Duty.
I’m surprised ASIC don’t allow the banks to use the word “independent”. All the bank scandals and not one executive banned. IFA’s who want to be independent which is better for the customer targeted by everyone. I think ASIC just want rid of advisers outside of the main instos to make their regulatory job easier so its go soft on the instos, go hard on IFA’s.
You leave a bank so you can provide advice that is in the clients best interest with research into the most suitable product/s for the client rather than fit the client to the only product on the APL yet you’re you’re not independent. When commissions rates are 60/20 across the board will they then allow the use of the ‘word’??
What words can I use to describe what has happened here….. this looks and feels like it has gone too far! #stunned
Look, they want to keep the term ‘independent’ sacred… that’s fine, whatever.
BUT, they need to allow everyone else to differentiate themselves from vertical integration. Non-aligned should stay an advertising point in itself, absolute unadulterated joke to lump everyone else in the same basket as the banks etc.
or we could use what independent means: “free from outside control; not subject to another’s authority”. More words but possibly a more complete message.
Just don’t use the word “Independent” and move on giving great advice to clients who want it
If only it was that simple. You also can’t use non-aligned or independently owned.
Why am I bothering to spend several thousand dollars every year on access to INDEPENDENT research if I can’t tell my clients about it? This is seriously F#@$d. ASIC aren’t even pretending they want to improve our profession anymore. They are deliberately trying to dismantle it. And these guys want more power?
I guess Advisers now pay for ASIC and as the Banks own 85% of Advisers in Australia it would make sense it seems that they control 85% of ASICs decisions.
It truely has become a user pay model again to the benefit of Banks and the detriment of consumers and small business.
If anyone had any doubt left about the Banks and Institutions influence over ASIC & ODwyer and their desire to wipe out the 15% of advisers they don’t own and control. You can’t have any doubt now !!
ASIC, ODwyer and the Banks should be utterly assamhed of their behaviour and ultimately when more advice clients get wronged by this model, they should be accountable.
Chance of them being accountable = nil !
One of these bureaucrats-cum-lawyers is eventually going to try to shake down the wrong practice and get squashed by a real lawyer.
This is like a bizarre episode of The Office! It would be funny if it wasn’t true and damaging to consumers.
Find another word with the same meaning. The law states the WORD independent.
bit hard when it also states “any other word”” (iii) any other word or expression (whether or not in English) that is of like import to a word or expression covered by any of the previous subparagraphs; and
Has ASIC not got something better to do that hunt down advisers that are doing the right thing by clients…?
this is just bloody ridiculous now. Good job IFA keeping up the pressure!!!
[i]”We consider that ‘independent research’ could mislead and confuse consumers into thinking that the advice firm is completely free of conflicts or influence.”
[/i]So what would a firm have to do to remove those conflicts or influence? The only possible way to do this is to provide advice for zero reward whatsoever. Even a completely fee for service model is not free from conflict. In fact it is often more conflicted because it encourages expensive, inefficient, internal processes to provide financial product functionality that could be delivered far more cheaply and efficiently to the client using a third party provider. SMSFs being the classic example.
At the end of the day “independent” can have no other meaning than “free”, under ASIC’s position of independent being free of any conflicts.
It’s time some of us stood up for the industry and took these jokers on in a court of law.
Yep I think a class action or some other similar style attack back from IFAs is totally warranted
Good to see ASIC tacking the big issues….
This is just Orwellian. Now ASIC is redefining the English language to its own biased bureaucratic interpretation, and prosecuting those people who continue to use it the in the way it has been used for centuries? They are completely out of control.
ASIC would be better off having a look at some AMP websites. It’s a bit like playing find the AMP logo. oh there it is in tiny writing at the bottom of the page.
How much can ASIC really restrict with language? It looks like they see any use of the word Independent as bad… what about “my business has only me as the owner and the licence has only advisers as owners” cumbersome language but it cannot be regulated to a “term” Sounds like a lawyer trying to make an impression and has lost commons sense or understanding of language.