Speaking to ifa, Maddern Private Wealth founder and executive chairman Dr Dennis Maddern said bank-owned advisers should fully disclose their ownership structure to clients.
“I think there should be further disclosure in that if you go to an adviser, you should be told that they are 100 per cent bank-owned [if this is so],” Dr Maddern said.
“Accountants don’t have problems with this level of disclosure and they don’t have dealer groups,” he said.
“Lawyers don’t have it and they don’t have a problem.
“If we are going to match ourselves in the same vein as a lawyer or an accountant and seek to walk in that space, then I think the consumer must have the greatest disclosure that you could reasonably give.”
Dr Maddern’s comments come after ifa reported that new business name registration processes are creating havoc for authorised representatives.
“I don’t think ASIC necessarily does things on the basis of bureaucracy or extra work for firms,” Mr Maddern said.
“In the financial services industry – given that we must have greater disclosure for the consumer – what ASIC is requesting is not really a problem,” he said.
Dr Maddern said over 80 per cent of financial advisers are owned by banks or insurance companies, highlighting the conflict this creates for clients.
A client might think they are going to an independent adviser because it has a name like ‘Acme Planning’, but unbeknownst to them that adviser is actually aligned to a bank,” he said.
“You’re going to end up in those bank products because at the end of the day, the advisers are incentivised,” he said.
“It’s not like franchises like Baskin & Robbins – you really need to know who you’re dealing with.”
Mr Maddern added that dealer groups must “get in line” with the rest of the economy.
“Dealer groups get overrides, subsidies on PI cover – all sorts of different benefits now – and I just think they need to get in line with the rest of the economy.”
Have we time-travelled back to 1990? Isn’t this level of disclosure already mandatory or am I missing something? Also, when are we going to move beyond this paranoia about not being seen as professional? I think the industry needs to develop a thicker skin and accept that we won’t ever be universally liked, trusted or admired by all. Who is? Lawyers? Accountants? We all have our critics, so let’s just get on with being the best damn advisers we can possibly be and let the rest take care of itself. Cheers.
Full disclosure of ownership (andother associations) must be stated in a Financial Services Guide and a Statement of Advice.
If the adviser’s practice is 100% owned by a bank these documents must state that.
Any association with a product issuer must also be disclosed.
These are the disclosure documents (not a financial plan as some advisers think and SoA is).
Read the Law or RG175.
Dr Maddern my question is do we want to walk in the same space or be in the same vein as a lawyer or accountant? No thank you, most normal consumers have little or no regard for these professionals. I dont know how much more we can disclose in our FSCG. Not that most people read into it in that depth. Still you have had your 50cents worth.
James you are right on the money. You cant pretend to have the best interest of the client and not have FULL transperancy on All fees. To place the onus of responsibility on the client suggests a lack of understanding of the ‘bad deeds of the past’ and a serious naivety. To be a viewed as a professional and be accepted as a professional you cant be accepting payments without the client knowing. FoFA was designed with the best interests of all in mind. Client and Adviser etc. Looks like another dropped ball exercise by the industry.
I agree that transparency is a good thing. Lawyers are not transparent…billable hours is not transparent from what I have seen. Just made up with “what can I get away with” comments each week. Professional?
Professional is in our behaviour and standards set by ourselves at the highest level we can attain…not stooping to other groups who use a label.
Industry funds? Professional? this is not a panacea for our industry. Far better we get rid of the shonks in all aspects of our industry and take responsibility for our attitudes and behaviours.
Wait! Run that by me again. Financial advisers need to fully disclose their ownership structures if they want to be like accountants and lawyers because accountants and lawyers aren’t owned by financial institutions and therefore have nothing to disclose?
I agree with the principle of full disclosure as the conduct of a true professional, but I think this analogy lost its way a little bit.
What is the issue here? I am aligned to a bank and have no issue telling potential of this fact. If fact, clients feel good that a large institution is backing me with comprehensive research and auditing. It is a selling point, not a a negative