Reflecting on the latest Roy Morgan research – which found an increase in the number of consumers confused about financial planning licensee ownership – AIOFP executive director Peter Johnston told ifa that it is time for the culture of murky ownership structures in financial services to end.
“Institutions are permitted to operate ‘quasi-independent’ distribution channels that confuse consumers into thinking they are getting independent advice,” Mr Johnston said.
“We estimate there are over 14,000 advisers operating in this fashion and consider it a critical issue to be included in the financial adviser register to finally deliver full transparency to consumers to make informed decisions.
“The institutions’ vertically-integrated models have been confusing consumers for the last nine years and finally something should be done about it.”
The AIOFP is calling on the other members of the industry working group – which includes a range of political stakeholders from across the financial services industry – to support a move to explicitly distinguish between “independently-owned and institutionally-owned” advisers in the register.
Mr Johnston argues that even licensees that have a minor stake held by a financial institution should fall into the latter category, since these transactions present a “bigger threat to consumers as the business owners are incentivised to get as much FUA into the new owners’ products as possible”.
Comments made by AMP executive Steve Helmich at a recent Lonsec roundtable suggesting cross-subsidisation in the advice market may eventually become redundant indicate “the game is up” for vertically-integrated advice providers, Mr Johnston added.
ifa understands that fellow industry working group member Daniel Brammall of the IFAAA has indicated initial support for a demarcation between institutionally-owned and independent advisers in the government’s proposed register.
The Boutique Financial Planners lobby group within the FPA has also been a longstanding proponent of a more transparent ownership disclosure regime.
Should the government’s register disclose licensee ownership information? Have your say below
This very much sounds like the self interest drum beating loudly.
I don’t work in an Institutionally owned dealer – but I know many IFA’s that do – also I know a fair few in the private bank spectrum.
I acknowledge people like to differentiate their respective offering – but this inference that all-things Insto owned is crazy and smacks of pure opportunistic commercialism.
I would hope we (the IFA community) have learned from the previous 7 years of the last Govt – where division in the FP community kicked more own goals against our profession than any combined efforts of the ISN.
United we stand – divided we fall
Basically if you cant add something constructive – then you are not helping
Thx
I think its a good idea to have a register of advisers, including the employed advisers, but unless it clearly shows whether the adviser is part of a vertically integrated group and its ultimate ownership, it will still leave consumers wondering.
Let’s put aside for a moment Mr Johnston’s implicit assumption that having a financial institution on a advice practice’s share registery assumes that an adviser will ignore their obligations to advise in a clients best interests.
And, of course there is no murkiness on ownership. FSG’s disclose in a legally mandated fashion the ownership of practices.
I’d like to know what the AIOFP’s position is for practices who borrow from an institution to buy their practices. After all, debt can be just as big an influencer of behaviour as equity. At least equity investors share some market risk.
Bottom line: I have no problem with advisers seeing a benefit in promoting themselves as ‘independently-owned’, good on them – but to predicate your whole value proposition on denigrating other advisers who operate in a legal and ethical manner? I’ve got a problem with that.