In a formal submission to the Senate Economic References Committee inquiry into the performance of the Australian Securities and Investments Commission (ASIC), Industry Super Australia – formerly the Industry Super Network until a recent name change – has argued against the Abbott government’s slated changes to the Future of Financial Advice (FOFA) and called for broader scrutiny of financial advice business models.
“ISA submits that if there are further instances of misconduct or financial collapse, it may be necessary to reconsider areas in which the FOFA Bills were diluted, or even whether it is feasible to allow product providers to be the major employers of financial advisers within a vertically integrated financial services industry,” the submission states.
The submission indicates that the industry superannuation fund sector – like sections of the non-aligned private sector retail advice community – is concerned about potential competitive advantages and conflicts of interest stemming from vertical integration.
In September, ASIC itself made noises suggesting the issue of ownership of financial advice businesses was on its agenda.
“Where product manufacturers and dealer groups are integrated and are incentivising for recommendation of a particular product, this can assist in replacing the lost benefits from conflicted remuneration under FOFA in that it gives an avenue for businesses to grow their client base,” ASIC senior executive leader, financial advisers, Louise Macaulay told the Finsia conference in Sydney last month.
“We think there is an inherent conflict in those businesses and are interested to see how those businesses are going to be dealing with that conflict – it seems to us that advisers are more likely to offer products of their parent company.”
The ISA submission also defended ASIC’s role in the Commonwealth Financial Planning affair, blaming problems on the insufficient “pre-FOFA regulatory system” and making the case for a review of ASIC’s funding.
Budha, if you ask a Holden dealer which is the best car, bet they don’t say a Ford!!
Yes disclosure for owned licencees should be looked at. In the same piece of regulation ISN/ISA must also disclose all conflicts of interest, directors remuneration and affiliations, insurance commissions on group risk, FULL investment management fees and advertising costs.
They also need to explain, now THEY are under fee pressure, how they determined the capability of their in house asset management teams. If they pay peanuts are they employing monkeys for asset management for their clients.
BRING ON A LEVEL PLAYING FIELD!!!
I am not sure of the Holden dealership analogy. How many people go to a car dealer hoping to get advice about the best make of car?
it all about disclosure,
my view is financial planners should be independent of any product manufacturer/ bank Or insurance company including dealer groups each advisor is self licensed no different to accountants/lawyers
ISA needs to clean up their own back yard before throwing stones- but their statement is valid.
Their insurance coverage is open to litigation- statements show premiums collected and the coverage provided—“”OOPS”” you were not at work when we changed providers or other events–Sorry–claim denied. How do you B—–s get away with it. lets see the regulator take this sham on. Their lawyers offer a token payment if enough noise is made. Not good enough and if a planner did the same- it would be front page.
Does this mean EBA’s & Unions will no longer be able to stipulate that Industry Funds be mandated for their members?
For the first time I find myself in part agreement with the ISA (and believe me, I am one of their biggest critics!!!). Of course the provision of advice, owned by a product manufacturer is a conflict. How can it not be?
However, the ISN et al would need to stop the provision of in house advice if they do not want to be seen as hypocritical.
Hypocriticates! ISA / ISN is nothing but conflicted as their ‘planners’ do not offer anything but their own products and attempt to retain clients from switching to better products with misleading information and advertising. These are sickening in their sleazy tactics and antics of trying to look holier than thou and yet have the ultimate conflicted state themselves
These guys are never going to stop undermining us until they nag us out of business. The ISN or whatever name it chooses still doesn’t get it and yes, some of the FOFA reforms should be rolled back.
Is this ok Leigh?
For possibly the first time I agree (in part) with ISA. This is in so much as Product providers owning Financial Planning firms or being Licensees do create a conflict of interest problem.
I however, don’t agree that they should be banned from doing so, but rather this conflict of interest should be more prominently disclosed. If I go in to a Holden dealership I know that they will sell me a Holden, not a Ford. Unfortunately, most clients don’t understand that if they go in to a Financial Planning firm owned/Licenced by a product provider that there is an overwhelming possibility that they will be sold a product from that provider (despite the fact that there may be a wide APL).
This lack of knowledge about the relationship between Adviser/Licensee/Product Provider doesn’t allow the client to make an educated choice about the advice/products they receive.
Are the industry funds announcing here that they will cut all ties with their in-house financial advisers’?
Next, they will be banning Holden dealerships from selling Holden motor Vehicles and supermarkets from selling their branded products. Perhaps while they are at it, all Australians should be forced to support the opposition in footy, cricket, rugby, etc. for to not do so would be a conflict of interest. Where will this lunacy of ISN/ISA end?
The industry funds decry the retail sector but ignore their lack of concern for members welfare. They had we would not have the under insurance problem we now have today. Also the financial services sector is not the only ones to lose clients money or abscond with for their own benefit.
…and intrafund advise will of course do the complete opposite?
The ISA claimed to extend an olive branch back in July. They don’t stop having ago at others in the market though. Last week it was SMSF. They have some good points here though. Sadly Industry funds providing (the current broad definition of)intra fund advice is also a best interest problem and a vertical integration problem
Aren’t the larger industry funds bringing investment in-house? Is that vertical integration? Don’t industry funds have advice centres dealing with not just “scaled” advice but also holistic? Do they truly believe they fly under the radar due to their foggy structures?