The Australian Securities and Investments Commission cannot have simply overlooked the issue of vertical integration in its conflicted remuneration guidance and there may be an agenda at play, ifa has heard.
In a comment posted on ifa yesterday, Jason Bragger, principal of Brisbane-based Paragem practice Dolfinwise, said vertical integration – whereby subsidies or incentives are provided to aligned advisers to recommend the products of their parent company – was not adequately dealt with in ASIC’s recently released guidance.
“Vertical integration is the elephant in the room when it comes to conflicted remuneration and more importantly conflicted advice,” he said.
“It’s not possible ASIC is not aware of the elephant but as the problem is too big and too entrenched to the benefit of the powerful bank lobby the elephant remains in the room,” he added.
“Government and ASIC point at the mice they are busy removing from the room but we all know conflict free advice is harder to find than ever.”
Expanding on his comment, Bragger told ifa there is a lot of ambiguity surrounding vertical integration.
"Product manufacturers should be entitled to employ or license product advisers to distribute their products," he said, "but the concept of these people masquerading as 'financial planners' providing unbiased advice needs to be dealt with."
The comments follow an exclusive interview with regulation lawyer Bill Fuggle published in ifa sister title InvestorDaily today.
“I don’t see how ASIC could have possibly overlooked the issue of vertical integration,” said Fuggle, who is a partner in the Sydney office of Baker & McKenzie, the world’s largest law firm.
“Rather, it seems that ASIC has made a deliberate attempt to consolidate market share and power in favour of large vertically integrated market players, in other words – a deliberate attempt to squeeze out the non-vertically integrated players.
“The FOFA reforms and stand on conflicted remuneration in particular are positioned as some sort of attempt to even the playing field when in fact there is a deliberate move going on to tip the scales in favour of the bigger players and squeeze out the boutiques and smaller players [in the financial planning industry],” he said.
Does ASIC have an agenda against small and boutique advisers? Have your say below.
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