The SMSF Professionals’ Association of Australia (SPAA) has called for a new licensing system to encourage a proliferation of independent financial advisers, akin to the Registered Independent Advisor regime in the United States.
In its submission to the Financial System Inquiry, SPAA echoed its longstanding view that "high quality financial advice" is essential to minimise risks associated with establishing and managing an SMSF, but goes a step further, touching on the issue of vertical integration in financial services businesses.
“The financial advice industry has undergone significant consolidation over the previous decade with vertically integrated firms that both sell financial products and provide financial advice to consumers becoming the largest licensees in the AFSL system,” the submission states.
“The comingling of the product distribution/sales and financial advice can impair the independence of advice being provided to consumers. It is because of this that vertical integration can pose a threat to the provision of independent financial advice.”
While the submission makes clear that SPAA “does not contend that vertical integration…is inappropriate or should be prevented”, it also throws support behind calls to improve disclosure requirements for advisers licensed by product providers.
“Mandatory disclosure as to whether advice is independent would allow consumers to be informed in deciding whether the financial advice they are receiving is fit for purpose and offers them the best value,” the submission states.
In addition, the submission calls for a “clearer distinction between what is financial advice and what is factual or sales information”, echoing the comments made by former Federal Court judge Kevin Lindgren QC.
The submission suggests that the Murray Inquiry considers introducing a new licensing regime which would “encourage” greater numbers of IFAs, akin to the Registered Investment Advisor (RIA) system in the United States.
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