ifa reported last month that the corporate regulator was seeking external legal advice to determine whether it should prohibit advice firms from calling themselves ‘independently-owned’, unless they meet the Corporations Act definition of independence.
FPA chair Neil Kendall told ifa he agrees with ASIC’s concerns, as some advisers use the term to try and bypass the legal definition.
“Work-arounds like ‘independently-owned’ and ‘independently-minded’ are designed to mislead consumers about independence. We think they should all be under the same definition,” he said.
“If there is going to be a definition, it needs to be thorough. So incorporating independently-owned [into the Corporations Act] makes absolute sense.”
FPA chief executive Dante De Gori echoed Mr Kendall’s sentiments, adding that there is a misalignment between what consumers and advisers believe independent to mean.
“I think that is more of an education piece and we need to ensure that consumers are aware,” he told ifa.
“This then also means we shouldn’t be confusing the issue. Therefore the term independent, or any like terms around it, should only be used by those that actually meet the definition of the Corporations Act.”
ASIC also recently said it was looking at whether asset-based fees are conflicted, and if advisers who charge clients this way can call themselves independent.
Mr Kendall, however, does not agree with the concern.
“We’re not prescriptive about the way fees are collected. The definition to be independent now is quite a significant challenge for a lot of people,” he said.
“If you meet the criteria and it is clear to consumers, you should be able to use the term.”
Still, Mr De Gori warns that just because a fee model is legal, it does not mean it is always conflict-free.
“I think with any fee structure, irrespective of whether it may be legal or not, every financial planner and financial planning firm and licensee must consider the way in which fees are used and how financial planners are remunerated,” he said.
Really cant wait for an end to my identity crisis.
16 inquires ( and counting) into an industry over 7 years and now we are down to name calling…
Someone must be running out of issues.
Cant wait for the day…
To ASIC, Dante, FPA and others, when you decide on what “I am” and “what I can call myself” let me know, so I can get back to business.
Well surprise surprise, the FPA siding with other parties to try and make all advisers look the same to the consumer. When are the independently owned advisers going to stop lending their political capital to these organisations to then use it against them!!!!
Absolutely disagree with the author, Independently owned is far different in definition than independent, our AFSL is owned by US, the reason to break away from institutionally owned, i.e. AMP, is to provide that degree of independence.
They do not get it and again, the FPA, are so holier than thou but not really in line with today’s best business practice.
Does your business receive volume bonuses, special considerations or incentives from product provider in any form?
What garbage. We are not trying to deceive anyone. That is the problem this stupid use of words that are provocative and inflammatory. Consumers want to know who owns a business as they should. They need to be able to search a word or term if they specifically do not want to deal with a large institution. It is those institutions that want to restrict this.
“there is a misalignment between what consumers and advisers believe independent to mean”. Absolute rubbish Dante. Most consumers and most advisers think independent means not owned or controlled by product companies. End of story. It’s only ASIC, and a tiny number of advisers who shamelessly leverage ASIC’s bureaucratic stupidity for their own commercial gain, who believe independent means never allowing consumers the option of cashflow effective advice payment by commissions.
Re-educating every consumer in Australia to believe that “independent” means something completely different to what their own common sense tells them is both impossible and counterproductive. Why not just change the law to align with common sense? By siding with ASIC on this issue the FPA is proving yet again how irrelevant they are.
What a sad, pathetic joke. I own my own practice, I have no restrictions on the products I recommend (apart from research driven restrictions from independent research houses) and my licensee has no ownership links to product providers. But apparently I can’t call my advice independent, nor can I say my practice is independently owned. Meanwhile I hear advertisements on the radio announcing a financial planner from an industry fund product provider is ‘INDEPENDENT because we don’t pay commissions to financial advisers’. Has the world gone completely mad?
The world went mad many years ago. Time to wind it back
Exactly Ben. How can the Union Super Funds call themselves independent when the fund receives commissions on any increases in insurance cover above default levels by their members? How can they be independent when they receive bonuses if claims are kept below a predetermined level? How can they be independent when the fund trustee declines claims that the underlying insurer has approved? How can they be independent when close to 100% of users of the independent financial planning service from Union Super end up in a Union Super fund? How could any of the CFP’s employed by Union Super Planning recommend the insurance policies offered by the Union Super Funds? When will ASIC review the advice offered? Never. That’s my bet.
Of course the Institutionally / Bank aligned FPA agree. But it’s fine for the banks and institutions to hide their adviser behind various Licensee names to hide the bank / Institutional ownership.
Apogee owned by MLC / NAB
Financial Wisdom owned by CBA
Hillross owned by AMP
Securitor owned by BT / Westpac, etc, etc
It’s a very long list of “hidden” bank owned advice Licensee’s
How can these Licensee’s provide next to zero disclosure of their bank and institutional ownership ?
The hypocrisy of the FPA / Banks and Institutions never ceases to amaze.
I’m comfortable describing our business as independently owned. We hold our own AFSL, are not beholden to institutional interests, predominantly charge agreed fees (not asset based fees) and legacy commissions represent less than 1% of revenue – but that is sufficient to prevent us describing ourselves as independent.
There are plenty of consumers who want to deal with advisers not operating under large licensees. If this wording is disallowed there will simply be a different descriptor adopted – will the FPA and ASIC then act to prohibit that also?
Surely we already provide enough information to clients and prospective clients by way of an FSG and other disclosures that they can determine their own choice.