Industry Super Australia (ISA) has called on parliamentarians to investigate whether ownership of financial advice businesses by vertically integrated product providers is appropriate.
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.
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