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Advice consultants need fiduciary duty

As their clients prepare to comply with FOFA’s best interests duty, service providers to financial planners should also look at their own professional standards, according to an industry consultant.

Reflecting on ASIC deputy chairman Peter Kell’s warning to advisers to perform sound due diligence on third-party consultants, Pinnacle Practice director Anne Fuchs told ifa that the regulator does have a point.

“If advisers are looking to be seen as a profession then the third party consultants that support them also need to act like professionals and embody the behaviour that gives trust to consumers, so acting in the best interests of the clients,” Ms Fuchs said.

“Whether it's fee for service consultants, whether it's consultants that work with dealer groups, whether it is consultants that work in compliance, we all have to be striving for that best practice consumer trust so that we all get there in the end.”

In the past, some third party consultants working in the financial advice sector have helped foster a “numbers game” mentality whereby dealer group growth is the primary management focus of licensees, Ms Fuchs said, adding that responsible consultants need to realise “it’s about quality now, not quantity”.

Speaking at the AFA national conference in October, Mr Kell described third party research and compliance consultants as a “key risk” for advisers.

“This has come up quite a bit in our recent surveillance work … it is too often a source of problems for licensees,” he said. “It should be obvious that you can't outsource your compliance [completely].”