While the federal Opposition and many in the mainstream media lament the proposed changes to FOFA, the Association of Independently Owned Financial Professionals has called for the government to make further amendments to end “blatant discrimination” against IFAs inherent in the current system.
In a formal submission to Treasury, seen by ifa, the AIOFP’s Consultative Committee of non-institutional dealer group chiefs laid out explicitly the business models and structures that stand in the way of an “even playing field” in the financial advice market.
“Over 90 per cent of the advice industry is financially cross-subsidised by administration revenue where institutions achieve it via vertically integrated models and SMSF advisers via SMSF structures,” the submission states.
“With the banning of platform administration revenue sharing with independent advisers, FOFA is turning a ‘blind eye’ to the institutions’ vertically integrated models’ cross-subsidisation activities and disregarding SMSF internal administration dealings.
“Both activities are fundamentally conflicted as they are blatantly recommending their own internal administration services and disregarding all other options – surely the best interests regulations must come into play here.”
In order to end the “discrimination” against financial advisers not licensed by major financial product providers or those that choose not to provide SMSF services, the AIOFP reiterated its long-standing call for government to classify platforms as “administration services” rather than financial products.
Speaking to ifa, AIOFP executive director Peter Johnston clarified that the association is not opposed to the SMSF sector or vertically integrated institutions, but rather, seeks an end to the perceived double standard.
“[SMSF administration and vertically integrated models] can enjoy the benefits of cross-subsidisation … so why can’t independents who choose not to use SMSF structures or work for the institutions enjoy comparable conditions?” Mr Johnston asked.
At the AIOFP national conference, held in Hobart in late 2013, Assistant Treasurer Arthur Sinodinos indicated the issue of cross-subsidisation within vertically integrated business models was on the government’s radar and one of a number of issues in the financial advice industry under informal review.
The AIOFP runs a platform service, Personal Choice Private, which is 98 per cent-owned by AIOFP members and 2 per cent-owned by the association itself.
What about defining the definition of independence
Still amaze’s me you can be independent & be licensed via major aligned dealer group. By changing from 1% commission to 1% adviser fee?? Get Real
Cannot thing of any professional that works like less should look at the legal & accounting structure though no perfect but as lease there no aligned to a product manufacturer/allinged dealer group
Here here. It’s about time we all stood up and pointed out the inherent problems caused by FOFA, which encouraged this vertical integration and at the same time penalises independent planners who are required to insert pages of information about the costs of a platform, which is only an admin service and NOT an financial product. I think the main problem is that neither ASIC or any other government body understands what they are talking about.
Does this mean (2% ownership) that the AIOFP is no longer an “association” but a small financial services business and needs to be licensed?
Surely this is a conflict, re recommending their own product.
If AIOFP members own the platform that they direct clients money into, then surely they are not ‘independent’?