With the FSI having asked for consultation on the issue of vertical integration, AMP’s second submission does not mince its words, hitting out at allegations that non-aligned advice is in any way superior and arguing that vertical integrators offer additional value to the “Australian community”.
“There is no evidence that ‘independent’ advice is of any greater quality than advice from other business models; indeed advice from ‘independents’ has proved to be the most damaging to consumers and was the driver of the original Ripoll Inquiry,” the submission asserts.
“Only vertically integrated companies have the financial capacity to invest in the development of new and high quality financial advice solutions for consumers, which ensure strong competition and innovation in the market.”
Vertically integrated groups are better placed to assist ASIC with monitoring and compliance, the submission goes on to say, rather than the corporate regulator trying to “engage with thousands of individual firms”.
The submission contends that developments such as AMP’s announcement of mandated higher education standards and services such as PD days can only be financed by vertically integrated dealer groups, thereby producing consumer-facing benefits.
In addition, it argues for the status quo, asking that “the current regulatory model that supports a range of industry structures in relation to advice, including vertically integrated companies” be allowed to continue.
Responding to the submission on social media, boutique adviser Tim Mackay of Quantum Financial argued the underlying premise of AMP’s assertion about independent advice is invalid.
“To claim that an independent licensee can somehow cut a swathe of financial ruin through Australian society without institutional help is ridiculous,” Mr Mackay said.
The submission comes as a number of advisers within AMP’s Genesys dealer group are demanding greater “independence” and product recommendation flexibility, with some threatening to leave the licensee.
What could be more deliberately obvious from the past! AMPs assertion about independent advice is invalid. With their past EUs.
Could it be just more of the past, memory loss or the glasshouse syndrome.
QUOTE 27 July 2006 ASICs analysis of the files (which primarily related to superannuation switching advice) and subsequent investigations found that on many occasions, AMPFP
Planners’ files did not disclose a reasonable basis for advice;
Failed to make proper disclosures about the costs of acquiring the recommended product and the significant consequences of replacing the existing product;
Made statements on its website and in its Financial Services Guide that suggested AMPFP Planners could consider a broader range of products than permitted, which could have misled consumers; and
May not have had adequate arrangements in place to manage conflicts of interest.
No further comment!
So when my dealer group (now ex-dealer group) sold out to AMP and we were told directly by AMP that we could only use AMP platforms for all new clients and new money for existing clients, this was supposed to be “high quality financial advice solutions for consumers”????
Interesting to see such a bun fight going.
And please this is not a dig at IFA’s but wasn’t Storm basically independent.
I believe as a true profession 99.9% of advisers look to deliver the right outcome to their clients.
I see daily where FP’s are banned from providing advice for varying periods. Some for Theft, Non Disclosure etc. and they come from all areas of advice. Rouges will be rouges. I understand the thought that the education requirements for Advisers currently being raised to lift the standard of our profession would not stop rouges being rouges (how many highly educated people have committed horrendous frauds/theft) but it is a way of lifting the whole profession. However Degree’s/Education etc. hasn’t stopped Educated Accountants, Lawyers, CEO’s etc. from shonky and dishonest behaviour. We should stop the divide in the Profession and all commit to providing clients the best advice.
I don’t mean illegal as such Leo….more like swimming outside the flags a bit. Putting all of client money in one investment, one debenture fund etc. under the disguise of creating nice secure retirement incomes for people. They’re out there now, still. They dont seem to get noticed until people lose everything, then they get shut down. If you’re a small firm operating in a big city would ASIC even know you existed?
Vertical or not the ability to meet a clients needs is paramount. I planned for 15 years mainly under vertical organisations. I got out when I started losing higher FUM platform clients because I couldn’t offer SMSF even though every qualification was in hand.The only solution offered was to have an SMSF and invest it all in a platform which is a tad pointless. If I had my time again I wouldn’t go near a vertical in this new advice world, I think you have to have a much broader offering these days to compete with your peers. If you can’t offer a full range of solutions including SMSF, Direct Shares, Direct Property, Estate Planning and so on you’ll miss out on some great opportunities for your clients and your businesses. I’m very pleased to not be doing it any more and feel for the planners feeling restricted but they can always vote with their feet I guess. I did and haven’t looked back.
Gerry, if you were looking to hide you would run dodgy schemes without any AFSL at all. Why go through the hassle of setting up a AFSL to do something illegal?
If you’re in the slightest way “dodgy” you would apply for your own AFSL wouldn’t you? Nice place to hide and operate your shonky debenture fund raising scheme or property gearing SMSF scheme. By the time ASIC find you it’s too late and people have lost their dough with no compensation available.
Raising education standards might help remove some of this dodgy stuff, but it’s just a few instos that have implemented that. The crooks can still do a few DFP subjects and get an AFSL.
Imagine if “XYZ we aren’t dodgy ltd” ruins the finances of 1000 people. Will they go back and do an audit and compensate victims? Nope..up goes the closed sign.
If I had my lifesavings to invest I think I would go see an adviser with institutional backing. That is, until some things are drastically changed in this industry.
[i]Only vertically integrated companies have the financial capacity to invest in the development of new and high quality financial advice solutions for consumers, which ensure strong competition and innovation in the market.[/i]
Innovation, where may I ask??
These large insto’s specialise in retaining old historical products on ridiculous fees. AMP couldn’t innovate their way out of a wet paper bag.
This from the organisation of Hotel California. Their advisers “can check out any time they like but they can never leave”!
The tied agent model died decades ago – except at AMP.
Innovation my arse!
Whilst many submissions have been made to the Murray enquiry, I would like to see what the associations have to say ? The last thing we need is more BS legislation that achieves nothing but more paperwork, labelling as an independent with one white label product and the use of one insurer means nothing but more confusion for the consumer. I am in no way defending AMP or any of the other big players, I’m simply suggesting that being “big” doesn’t have to make you bad and being “small” or “independent” offers no insight into the quality of advice. I suspect this is another furphy designed to deflect from the real issue of lack of accountability and responsibility within the upper echelons of power within these large institutions, as is this call for more education. As always the “all care and no responsibility” ethic continues, another happy enquiry by the overpaid CEO – bet we get another great outcome for the financial planners- NOT
Keep swinging everyone – about time we started to get this all out in the open.
Just quietly though Storm, Basis and agriculture failures – what was behind them was commissions and in the case of Storm, % of FUM which to some people is a commission by another name. These incentives, led to the bad advice. Other incentives or lack of independence have led to the EU’s at CBA, Macq and AMP.
The conflicts are the problem. There is too much proof to show they can’t be managed when other stakeholders such as shareholders take priority over the client.
Solution – true independence. Now is the time to break free and start your own business. First step, get to the IFAAA Symposium in Sydney, November 9: http://www.ifaaa.com.au/sympos…
We (existing members) will be sharing everything we can in the time we have because this is the future of advice.
Only vertically integrated companies have the financial capacity to invest in the development of new and high quality financial advice solutions for consumers, which ensure strong competition and innovation in the market.
Read, “Because we are able to cross-subsidise our advice fees with product margins, we are more profitable than independents”.
Given the in-fighting that is happening within Genesys at the minute, it is no wonder AMP are a tad defensive. Bu, to suggest that non-aligned AFSLs lack the financial resources to impose appropriate regulatory supervision of their advisers is not only non-sensical, but dishonest.
Ah yes would you please remind us why AMP were punished with that catastrophic Vertically Integrated EU from ASIC again? Something about inappropriate advice, switching product to AMP and not being in the client’s best interests. It is good to speak from a position of strength AMP. Vertical integration – way to go Australia. BTW how are those record compensation payouts going with CBA, Macquarie etc??
This has become a turf war rather than a quest for unbiased high quality financial advice.
Throw out a bucket of shizer and hope some sticks, fingers crossed that our market share goes up as a result!
I cant stomach AMP, however the suggestion that advice from every vertically integrated model is inferior to an independent model is a little simplistic and fails to take into account the reliability of all aspect of advice and delivery of a desired outcome. As long as consumers know who they are dealing with the decision is theirs not ours. Ex AMP clients remain a great source of new business to our practice. God bless em!!
“Vertically integrated groups are better placed to assist ASIC with monitoring and compliance”- This worked well with CBA.
“services such as PD days can only be financed by vertically integrated dealer groups”- Instead of going to product flog sessions disguised as PD days, an IFA can go to the FPA, SPAA and AFA conferences.
IFAs recommended Trio, astarra etc. because the research houses gave them five stars in exchange for cash! they are almost as conflicted as the insto afsls
Well, that sure brightened up my day. AMP have such wonderful products and always put the customer first by recommending they use other products
Matthew, at least when those mid-tier dealer groups and agribusiness schemes etc collapsed consumers knew who they were dealing with, unlike the finwiz and genesys clients who have no idea.
Didn’t I read somewhere or was it stated on the ABC’s Checkout Program that over 90% of AMP clients have an AMP product. There’s diversification for you. Oh yes and didn’t CBA recently have some issues with product pushing… or how about Westpac and BT…
While many points can be made about the perils of vertical integration the point raised here is actually correct. Storm, Westpoint, Basis Capital, Agriculture products etc were the domain of the non-aligned adviser market. Yes the big players like AMP should open their APL’s wider, but one of the main reasons why financial planning has got such bad press is from the very products they have left off their APL’s.
I imagine everyone in Hillross that thought they were an independent thinking group now realise that AMP excutives sitting in ivory towers believe everyone but they are in the wrong….AMP also had an EU in the last few years for a reason. More importantly….AMP pay their aligned practices money ( handcuff in lieu of wonderful value proposition? ) to just be in the AFSL at the end of an agreed period of time ….wonder what this all means to Murray and IFA symbolism…?
I thing we are missing something here we have CBA,AMP Macquarie all with EU’s for poor advice or inappropriate supervision. The largest losses in the last 6 years were from product failures not from advisor issues. AMP had a number of products that were promoted as being highly liquid and yet we are still waiting for them to be paid out.
For years we had bank advisors being fired for not reaching product sales targets quality of advice was never a consideration.
IFA’s are exactly that independent of large corporates and products, “most damaging to consumers” I don’t think so perhaps “most damaging to corporate profits and market domination”.
I have not heard so much crap for ages, AMP you really take the cake this time, just how low will you go to protect your one size fits all model!
WTF
this is the problem with financial planning everyone needs to grow and stop BS the consumer will have the final choice. Large groups might be better resourced but where is the choice or is it just a distribution network for their product
Is anyone surprised by such stupidly bias comments. It is simply further evidence of how removed from the client interest they are. If they are so bloody fantastic why dont they remove all NON Amp products from their APL and see what the consumer thinks. And this is who the Rudd/Gillard govt sought advice from