Andrew Saikal-Skea, founder of Saikal-Skea Independent Financial Advice, is an adviser familiar with the “independent” label.
“For me, being independent is really important because I just don’t want to have anything in between me and my client,” Saikal-Skea said on The ifa Show.
“I’m just saying [to my clients] there is no conflicts of interest. I’m completely independent and I’m free to the best advice.”
Saikal-Skea has also found that in the wake of the royal commission, the independent label has helped create a greater sense of trust with his clients, particularly as advisers and the broader financial industry struggle with what he calls a “branding issue” that can make people unsure as to whether there’s “undue influence in the advice”.
However, he noted that independent advice is not an automatic guarantee of quality: “Just because the advice is independent, it doesn’t mean that it’s good. It just means that it’s not conflicted. Same thing, just because advice isn’t independent doesn’t mean that it’s bad. I also don’t think that everyone being independent is practical in a lot of ways.”
For Saikal-Skea, Australia’s licensing system is an obstacle to having more independent advisers.
“I don’t think that we have a licensing regime that probably allows enough financial advisers not to have some linkage with product providers,” he said.
This means often having to jump through hoops and loopholes to meet the “strict” legal definition of independent.
Being authorised through a large-scale licensee, in Saikal-Skea’s view, also poses obstacles for removing conflicts of interest from your business.
“If you work for a licensee that owns a product and has a very restrictive APL and they’re pushing in a certain direction, the conflicts are very high compared to if you [if] another adviser on the licence is charging commissions and therefore you can’t say you’re independent. Your conflict of interest is very low – there’s a scale,” he said.
Though “independence” might signal in some a quasi-romantic notion of operating a financial advice business, the caveats and considerations that come with this practice method may simply not be practical for your operation.
For Saikal-Skea, the smaller number of clients he deals with also helps make an independent operating model workable within his business. Top of Form
I don’t understand the definition of independent by ASIC. Insurers pay the same commission so you aren’t selecting insurers based upon commission level. It’s just telling clients they can’t pay via commission which is often preferred by the client and efficient for them. BID covers off selling too much insurance which is the only argument I’ve ever heard for the differentiation and that argument is flawed in my opinion.
Hi there, maybe you are newer to the advice world or from the past bank advice world ?
Its simple to understand:
– The Banks gobbled up many different AFSL’s to own the advisers in a vertical chain. And because of Bank ownership they could not be Independent.
– As the Banks wanted all these various, Non Bank named AFSL’s to seem independent they badgered Canberra / ASIC for the following rule changes:
i) Allowed to hide Bank logo’s and reference to bank ownership of AFSL’s and thus Advisers in size 6 font in the back of an FSG.
ii) Made it as close as possible for all non institutionally owned advisers to claim to be independent via Div293(a) of the Corps Act.
That my friend should help educate you about the ASIC independence definition.
One of the biggest barriers to “independent” advice (as defined by the Corps Act) is the inability to provide most clients with insurance advice.
Regardless of what so called “consumer advocates” say, most consumers are unwilling to pay the higher upfront costs of separate insurance advice fees combined with commission free premiums. They prefer to pay a commission inclusive premium that lowers their total cost in the first year, and requires no payment at all if their application is rejected. Most consumers prefer this even though their total costs can end up being higher over the longer term. But advisers who give consumers the payment option they prefer for insurance advice, can never call themselves “independent” regardless of what they do in the rest of their business.