Clients in dark on insto ownership

Financial planning clients are confused about the independence of their adviser, with many ignorant about institutional ownership of licensees, according to Roy Morgan Research.

According to the research – which was compiled off the back of more than 3,000 interviews with advice clients – many customers are not accurately perceiving the “independence” of their financial planner or the relationship between their adviser and a parent company, especially where their planner does not use the branding of the institutional owner.

For example, 51 per cent of clients of Financial Wisdom considered their financial planner was “independent” rather than “working for a financial institution” despite the ownership of the Commonwealth Bank, whereas only 21 per cent of Commonwealth Financial Planning clients perceived their planner to be “independent”.

Similarly, 48 per cent of (NAB-aligned) Godfrey Pembroke clients perceived the group as independent, while 37 per cent of Retireinvest (ANZ) clients and 33 per cent of Count (CBA) clients believed their adviser was independent, respectively.

Roy Morgan spokesperson Norman Morris said the consolidation of the advice market by the larger financial institutions made the term “independent” more important.

“The ease of obtaining wealth products and the increase in people using the direct channel means that the retail funds management sector will increasingly rely on their adviser network an advice to retain customers, but at the same time be acting in the best interests of their client,” Mr Morris said.

“With a large proportion of advisers being owned by fund managers the need for clients to understand the extent to which their adviser is independent will become critical and should not be confused by branding,” he added.

The findings follow a report put out by the Australian Securities and Investments Commission (ASIC) yesterday indicated the regulator has concerns about the increasingly concentrated ownership of the advice market.

The ASIC report found that “around half” of the 21st to 50th largest licensees are “either wholly owned or majority owned by a product issuer” and that the “majority of licensees’ income was received from product issuers”.

These two factors may “give rise to both potential and actual conflicts of interest, especially where advisers recommend products issued by related parties”, the report stated.

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