FOFA’s ban on conflicted remuneration will not affect the sales culture being driven by executives in vertically integrated institutions, a former Commonwealth Financial Planning adviser has told a Senate inquiry.
Whistleblower Jeffrey Morris gave evidence before the Senate inquiry into the ASIC-Commonwealth FP affair in Canberra yesterday, expressing his view that the FOFA legislation is powerless to overcome ingrained conflicts of interest in the financial advice sector.
“[Banned former Commonwealth FP adviser] Don Nguyen was not a rogue planner… he was simply a symptom of a system that is fundamentally broken and a system that is bound to get much worse if the current trends are allowed to play out,” Mr Morris said.
“Despite FOFA banning some forms of conflicted remuneration, the ghost of conflicted remuneration through bonus schemes based on product sales has not been laid to rest.
“The financial advice industry today is a quagmire of conflicts of interest of which adviser remuneration is just one.”
According to Mr Morris, the culture of bonuses within vertically integrated businesses is a far greater problem than pre-FOFA product commissions due to the “cascading effect” right up the chain to senior wealth management executives.
“[Commonwealth FP’s] remuneration model has changed, but it only has a ‘reduced emphasis’ [on sales],” Mr Morris told the inquiry, paraphrasing from the Commonwealth Bank’s submission. “FOFA of course doesn’t affect the managers at all.”
Mr Morris revealed that Commonwealth FP advisers were previously ordered to “hose down clients” to make sure they didn’t make complaints.
“The order was given to act in the interests of the company, not the clients,” he said.
The revelation comes less than a week after the publication of a submission by AMP-linked adviser Rhys Wood, in which he points to “systemic bias” towards in-house product at vertically integrated advice businesses.
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