In a blog post published on Tuesday, Profession of Independent Financial Advisers president Daniel Brammall said the regulator’s case against the Commonwealth Bank, which alleged breaches of remuneration law through funds paid to the bank for selling Colonial First State super products through its retail branches, would be “the first of many” cases in coming years.
“Make no mistake, once the regulator has shot down these larger targets, the regulator will be focusing its crosshairs on smaller AFSLs and how they are dealing with the conflicts of interest prohibited under [FASEA] Standard 3,” Mr Brammall said.
He added that small and medium AFSLs had put themselves at risk in recent years by outsourcing their compliance functions to external consultants with questionable views around the application of conflicted remuneration rules.
“These consultants are taking the view that there’s no conflict in insurance commissions anymore because all insurers pay the same percentage,” Mr Brammall said.
“The insurers don’t all charge the same premiums, though, and this is a consideration that needs to be flagged very clearly in the advice – why this particular insurer was chosen when cheaper premiums exist.”
Mr Brammall said such licensees were in even more danger given that the FASEA standards had been added to the list of potential breaches for the regulator to investigate, and that these could be enforced retrospectively.
“The ASIC action against CBA dates back seven years – when the regulator and the yet-to-be-formed independent disciplinary body run out of targets, they will be looking back at the breach registers of a good cross section of small and mid-size AFSLs and asking where are the Standard 3 entries,” he said.
“Be assured, they’ll be letting the courts test a few of these cases.”
He added that recent comments from FASEA board director and Ethics Centre head Simon Longstaff indicated that FASEA standards were “just as legally actionable” as corporations law.
Simon Longstaff is dreaming. Guidelines are subjective and not statutory obligations. There is no such thing as the Fasea Ethics Act. Unless Corp Act is amended to specifically capture the guidelines as requirements.
No dream Patrick. The Code of Ethics was established by a legislative instrument and the Standards within it are a matter of legal obligation.
Great point the the CBA case will be a model case for many other conflicted remuneration model. About time, too.
Appalling long bow being drawn that this has anything to do with insurance commissions paid to financial advisers.
I don’t really get the concern about insurance. This conflict was addressed by the FASEA committee in December 2019 but the key point is sound – there are lots of nasty little conflicts and whitelable badges etc in the smaller dealergroups and it would be great if asic had the resources to ferret them all out and close them down. Smaller groups are often even worse than the majors same person is the RM, the investment committee manager, the main adviser and, hey presto the biggest seller of their product.
I think he pays to write on this forum. otherwise, no one would listen to him.
doesn’t even have a degree, well doesn’t show one on the FAR anyway.
PI insurers will leave the market for boutique AFSL , 1 adviser $30,000 premium just not worth the risk for them
Hmm .. ‘scuse my ignorance .. why would ASIC IGNORE the conflicted relationship in ISA, IFM and their internal products and asset management? Or Q Super and Q Invest adviser commissions more accurately ?? Low hanging fruit and populism I suspect. Why bother with small AFSLs ? There is a richer tapping right there for the obliged ethical hungry regulator … Wilson wilson …?
The conflict I see here is that IFA keep giving Mr Brammall airtime like he is an independent commentator! Clearly a conflicted PR stunt for his organisation and AFSL. It would be interesting to peel back the cover’s of his AFSL as those that preach holier than thou, are often sinners themselves!
exactly. you only need to look at some of the people in his scheme. usually lowly qualified persons.
I don’t need a lecture from you Dana Carvey
this is one of my pet peeves, why anyone and everyone thinks they need to impart their knowledge to financial planners. most of us are successful entrepreneurs and pretty well off. have you got an AMG or a collection of swiss watches Dana?.
I am more qualified than you Dana. for all those who want to impart knowledge to me about anything to do with financial planning, ask yourself, have you got a graduate diploma of financial planning or masters and have passed the fasea exam and are a practicing adviser with more than 7 years experience.
if the answer is no, please sell your wares elsewhere and get lost
Just another Click Bait Headline – as long as the adviser can demonstrate that they did their insurance & premium comparisons and the product was most suited to the client, irrespective of the premium, then all is well! A good adviser will compare the most suitable product first then cost comes next, after all there’s no point selling the cheapest Income Protection policy when it lacks features and definitions the client needs no matter how cheap it is!
exactly. dana, doesn’t really know what he is talking about.
Unfortunately not. The process you have described is [i]managing[/i][i][/i] a conflict of interest. It is not [i]avoiding[/i][i][/i] a conflict of interest as required by FASEA Standard 3. It is actually impossible to avoid all conflicts of interest unless advice is being provided free of charge. Which is why Standard 3 is a loaded gun for biased regulators to use against any adviser they want to persecute. It has to be fixed.
Insurance commissions are not conflicted remuneration as per FASEA Standard 3. Not sure what you are drinking but you should stop as you are not conversant with FASEA.
Actually they are. So are asset based fees. So is fee for service. All forms of adviser remuneration are conflicted. This is the big problem with FASEA Standard 3.
Even the self righteous Brammall could be found guilty of breaching Standard 3. Every cloud…
Thanks Daniel, really interesting insight as to why we should join your organisation and your AFSL? Is it not a conflict of interest every time you jump online to comment on something that suits your personal financial agenda? A lawyer said to me a long time ago – do the best for your clients, always put them first – that’s the best form of compliance.
I suspect you are well and truly already a disciple of Daniel and his merry band of followers.
No need to put yet another Daniel advertisement on IFA .
He must already have a friend on the inside that continues to give him space.
Did the Lawyer put that advice in writing ?
You must be short on head lines, how Mr Brammall built a bridge between CBA and small AFSL’s is questionable at best and clearly shows his lack of industry knowledge. What it does show is the fractured nature of the advice industry and the so called heads of the various industry bodies.
The banks are an easy target as they have deep pockets and need move on with their more profitable business. ASIC knows the challenges of reviewing historical records. They are relying on the banks balance sheet and their need to be seen to be doing something to solve the problem and pay for their sins. This is not setting a precedent. Small AFSL’s on the other hand will fight tooth and nail and force ASIC to justify any action against them. That is a very different exercize and ASIC know it.
A couple of things here. The first being that ASIC has already stated they will use the corporations act and not the code of ethics, secondly Prof. Longstaff stated that the Code had the force of law, not that it was “legally actionable”. Breaching the FASEA code of conduct may result in you being disqualified and unable to practice, breaching the Corporations Act carries various penalties including criminal penalties and a banning from the industry as well as being found an unfit person which will also result in an inability to be a director of a company.
The CBA case is being looked at because it is/was a vertically integrated business model with nearly all life insurance sold being CommInsure as well other companies products being turned over for no good reason other than to place them, you can probably guess where.
Hardly the same as a non-institutionally owned practice using various life office products to put the client in a better position, or maybe you are suggesting advisers just use the cheapest products possible because then there are no ‘actionable’ conflicts?!
The hysterical rhetoric and lack of clear thinking in this industry at the moment is appalling.
Go beyond insurance into investment products. Have seen many in-house investment products from medium sized AFSL that are nothing more than a fee machine. Their poor performance is astounding and then the clients can’t get out of them. This type of business is very conflicted.
Very good comment.
Based on ASICs very poor assumption that cheaper premiums are in the best interest of consumers, when we all know better insurance is in the best interest of consumers, possibly better value for money, but when it comes to insurance contracts, more than any other commodity, you get what you pay for!
Like issuing a speeding fine for doing 80 in a 60 zone today , associated with a driving ‘transgression’ seven years ago when the speed limit now is 60 but was 80 then. Crazy stuff.
The ever present ,opportunistic self promoter Daniel Brammall always pushing the agenda of the righteous and holier than thou congregation.
As long as you believe you are independent, without any form of conflict and as ethical as the day is long, then the light will shine upon you.
The gift that keeps giving, or should I say taking!!