Responding to questions at the Boutique Financial Planning Principals Group (BFP) conference in Brisbane on Friday, ASIC senior manager, financial advisers, Trevor Clarke said the regulator is “absolutely aware” of the doubts in consumers’ minds about who ultimately ‘owns’ their adviser.
“It does exist as an issue, clearly. The question is whether it’s a misleading disclosure issue,” said Mr Clarke.
The comments come after a survey of 3,000 financial advice clients by Roy Morgan Research found consumers were confused about institutional ownership.
Roy Morgan found that 51 per cent of CBA-owned Financial Wisdom’s clients thought their adviser was ‘independent’ rather than ‘working for a financial institution’.
Mr Clarke said ensuring the client is confident and informed is a strategic priority for ASIC – and to be properly informed, clients “need to know who they’re dealing with”.
The issue is likely to become even more prominent within the Future of Financial Advice environment, he added.
Mr Clarke said he would continue to raise the issue with the senior executive team at ASIC, especially considering it is an issue that “keeps coming at us”.
“Conflicts of interest exist, clearly. But whether or not those conflicts lead to bad advice is one of those areas that’s subjective,” he said.
ASIC has its hands tied to an extent, because section 923A of the Corporations Act (2001) stipulates that remuneration, not ownership, is the determining factor of ‘independence’.
“The use of the term has been defined in the law, and it’s quite a narrow definition … If the law was wider and it started to talk about ownership, the type of choice people have – that’s a different thing,” he said.
The leadership of the BFP is set to meet with the senior executives of ASIC’s financial advice team in Sydney in the coming weeks to discuss the issue.
Noting the below comments, the idea of non-conflicted advice through all adviser businesses owned independently would be welcomed by consumers. Banks and industry funds provide investment fund opportunities but not the conflicted adviser networks. Now that would be world’s best practice.
Whilst instos may be fair game for an ASIC review I trust they remember Industry Funds provide the same vertically integrated advice model
Good to hear ASIC doing lots of talking amongst themselves. Sounds like they are looking for support in an area that has been an issue for how long? Plenty of examples of advisers out in the marketplace claiming independence when we all know full they are attached to an institutionally owned group. What have ASIC done about it? We all recall the whistleblowing affair with no action for over a year. It would be fair to say that consumers have lost faith in the system due to the actions or more importantly inactions of authorities and that the system is cloudy at best in the view of the industry participants themselves.
Section 923 looks like a beauty. Clearly ASIC lacks vision and the ability to read trends…..something they accuse the advice industry of.