The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry placed a number of documents on its website yesterday, providing background on the financial advice industry for consumers to peruse ahead of the second round of proceedings.
The documents draw heavily on public sources from ASIC, the Productivity Commission and Treasury to provide an overview of the topics it feels the public needs to know prior to the commencement of the hearings, such as the demographics and regulation of the industry.
It also specifically addresses the role dealer groups and licensees play in influencing the quality of advice provided to consumers.
“The AFS licensee of a dealer group (sic) may restrict, under their terms of appointment, the range of financial products their financial adviser representatives can advise on through an ‘approved product list’,” the document explains.
“An [APL] may contain ‘in-house’ financial products, as well as external financial products. Where such restrictions occur, membership of a dealer group will influence the financial advice provided, as the range of financial products the adviser can provide financial advice on is limited … The [APL] within a dealer group is usually not publicly available.”
The section goes on to detail ASIC’s latest report on vertical integration, which found that in the post-FOFA period of 2015-17, 68 per cent of all client funds across these businesses were invested in financial products owned and operated by related entities.
It also details the definition of independence as laid out in section 923A of the Corporations Act 2001 and the Productivity Commission’s estimates of levels of alignment to the major institutions.
The singling out of these topics in its background document indicates the commission will be keen to place the dealer group model under considerable scrutiny, analysing the role of licensees and parent companies in influencing misconduct.
AMP and its dealer group subsidiaries AMP Financial Planning, Charter and Hillross will be the first to face royal commission cross-examination in the next round of hearings, followed by CBA and its Commonwealth FP and Count Financial businesses.
The royal commission also uploaded documents on adviser education and professional standards and an overview of financial products on the market.
The three background documents can be accessed here:
- Background Paper 6 (Part A): Some Features of the Australian Financial Planning Industry
- Background Paper 6 (Part B): Education and Training Requirements for Financial Advisers
- Background Paper 6 (Part C): Financial Products Available to Retail Investors
have can i have my say at the Banking Commission
According to ASIC’s report 562, the following statement on vertical integration is included in its list of findings .
41 There may be benefits to vertical integration: see paragraphs 56–57.
However, a vertically integrated advice business gives rise to an inherent conflict of interest between the advice licensee’s interest in selling its inhouse products and the customer’s interest in receiving advice that is in their best interests. While the law permits this conflict to exist, it must be managed appropriately.: see paragraphs 68–78.
Are you kidding me?. So conflicts can exist but needs to be managed properly. Well it hasn’t been managed properly and is a disaster for consumers. Also, don’t the Industry Super funds run a vertical integration model trying to dissuade people from receiving advice that is after all in their interests. The swill at the ISN needs to be exposed for their deceptive and misleading conduct.
Can anyone tell me why, after all, if the best interest duty of superannuation law is to ensure benefits for retirement, death, disability for members, why then is ADVERTISING condoned by these very laws.
What is the point of creating a law, if an industry, special interest or political party can ignore these very laws as it suits an agenda ? Incompetent bufoons are in charge…thats why I guess
Some advisers do need to be removed from the industry for their behaviour while many need to continue on their path assisting clients and upskilling as they do. The model of vertical integration is, like most endevours by government, a joke.
A better outcome might well be individual licencing like accountants, lawyers, doctors, etc. No AFSL’s and certainly no institution using advisers to “sell” products with a myriad of conflicts enshrined in a flawed document called a Statement of Advice.
The issue is the advice after all. Not the selling of product. Now if government can think about the outcome from the best interest of the consumer first, then this would lead to a better outcome.
As our industry is with poor leadership, incompetant regulators,industry funds pushing vertical integration for themselves, conflicted politicians answering to lobby groups such as the Financial Services Council and the ISN, while ignoring the views of IFA’s and their associations, a consumer lobby group that only looks at the bad in the industry and not the overall good this industry has provided to consumers and the economy and an obediant media, used as an attack dog against us as IFA’s, this industry will falter and many will be the casualties.
Out of these ashes in 2024, what will we have. An over educated folk, whose fees will be higher than now, and the consumer straddled with costs and debt, unable to afford our fees to benefit. So, the problems of under funded retirees will be worse, and the taxes high and the lack of vision will continue.
In other words….nothing has been accomplished for the greater good of all, rather only serving the prosperity of few. Visionless fools at their best. This is what we have as leaders in this industry, regulators and politicians.