In its response to the FSI interim report, the association argued there is a “need to clearly distinguish between independent and aligned advisers”, following David Murray’s request for consultation on the question and ASIC’s endorsement of such a move last week.
“Vertical integration consistently raises issues around conflicts of interest, through restricted approved product lists and the perceived or real bias towards in-house products,” the submission states.
“The combination of separating the advice and product, as well as creating a distinction between aligned and non-aligned advice, [would lead to] one of the key objectives of a well-functioning market – transparency – [being] created.”
The submission suggests the business model of vertical integration has resulted in a general perception by consumers that advisers are “product floggers”, which has reflected negatively on the entire financial services industry.
At the same time, the submission concedes “there will be challenges in ensuring a model can be created that is clear and meaningful to the consumer”, but adds that it is a goal that “can be achieved”.
