The advice industry is entering a new “phase for independently-owned licensees”, with advisers looking to move away from licensees owned by large institutions, according to a dealer group head.
Synchron director Don Trapnell said that institutions which own licensees and manufacture products for distribution by their own advisers are “seriously conflicted” and that advisers will be looking to move to other business models.
“It’s fair to say some advisers left independently-owned licensees during the GFC to go to licensees owned by large institutions; they will now return,” Mr Trapnell said.
“This is because more discerning advisers want to provide advice that does not kowtow to an institution and more discerning clients want to know that the advice they receive is not biased towards the products manufactured by an institution which also owns the adviser's licensee.”
For less discerning clients, Mr Trapnell said that the ownership of an AFSL should be clearly explained at every opportunity as well as all documentation provided.
Institutionally-owned licensees may not be making it clear to their clients the relationship between their licensee and the product being recommended, he added.
“I believe institutionally-owned licensees may not be currently providing enough guidance to their advisers on this issue, nor encouraging them to have open and frank discussions with their clients that clearly explain the relationship between the licensee, the adviser and the products being recommended in terms the client really understands” Mr Trapnell said.
“Of course, if an adviser is an authorised representative of a licensee that is not owned by a product manufacturer, this conversation never has to take place at all.
“We encourage the regulator to look deeper into the vertical integration issue, particularly in view of the best interests duty provisions of the Future of Financial Advice legislation," Mr Trapnell said.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 17 Dec 2018AMP challenged by ASIC on fees for service conductBy Eliot Hastie
- 17 Dec 2018FASEA names provider for adviser examBy Adrian Flores
- 17 Dec 2018Former Liberal leader to join Crescent boardBy Adrian Flores
- 14 Dec 2018ASIC clarifies RG 146 requirements for advisersBy Adrian Flores
- 14 Dec 2018Sargon Capital acquires listed robo adviserBy James Mitchell
- 14 Dec 2018Industry body flags CPD burden under FASEA proposalBy Adrian Flores
- view all