The UK financial regulator has found that many advice firms are incorrectly calling themselves “independent”, but the Boutique Financial Planners industry body says Australia should still be following its lead.
The British Financial Conduct Authority (FCA) has released a review of “delivering ‘independent’ financial advice” following the term being clarified in law under its FOFA-like Retail Distribution Review (RDR) reforms.
While the RDR outlines that “independent advisers” have objectively to consider all types of retail investment product, and “restricted” advisers are only able to recommend certain providers, the FCA has said many advisers are still using the term incorrectly.
Despite teething problems with the UK model, Boutique Financial Planners president Wayne Roggero told ifa its application in Australia would be a step in the right direction.
“We should consider what the UK are doing and have a real close look at it to see how it works,” Mr Roggero said.
“I think there is nothing wrong with the advice that advisers give that are from a licence where there are restrictions in relation to the product they use, but the client needs to be educated that that is the case.”
Mr Roggero said the problem in Australia is that advisers cannot refer to themselves as independent if they receive a [product] commission.
However, it is allowable for many firms to call themselves an “independently-owned business” when they use a licensee from “the big end of town” rather than holding their own AFSL.
“There are what I would think are a number of 'independent' financial advisers out there that can’t call themselves that,” Mr Roggero said.
“So I don’t think the system is working at the moment properly and it’s certainly not fair.”
Mr Roggero also said that following the UK model would mean firms are obliged to disclose any ownership arrangements with the client.
“Some clients are going to want the big end of town; they like the safety and security and there is nothing wrong with that,” Mr Roggero said.
“But other people want to be getting what they see as advice that is independent or away from that type of situation and that’s where it’s unclear for a lot of people.
“It’s about the end-consumer being informed.”
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