FSI puts spotlight on AFSL ownership
The Financial System Inquiry’s final report has outlined its view on disclosure of vertical integration, flagging changes that may affect the businesses of institutionally-aligned advisers.
Among 44 formal recommendations in the 320-page report, the Murray Inquiry committee has suggested greater disclosure of financial advice industry business models and ownership structures.
“Often consumers do not understand their financial adviser’s … association with product issuers. This association might limit the product range an adviser or broker can recommend from,” the report concluded.
While it makes clear the committee has not seen “evidence of differences in the quality of advice from independent or aligned and vertically integrated firms”, the report suggests transparency of ownership will have inherent benefits for consumers and the industry.
Specifically, the report recommends that disclosure of ownership and alignment go beyond the current requirement to disclose within a Financial Services Guide, suggesting “branded documents or materials” as a solution.
Responding to questions from ifa at a press conference in Sydney today, former CBA boss David Murray explained the thinking behind the recommendation for increased disclosure, describing it as a sign of an imminent “paradigm shift”.
“There is an information asymmetry and a knowledge gap and an information imbalance between consumers in the financial system and product providers and distributors,” Mr Murray said.
However, the report stops short of recommending a UK-style differentiation between “independent” and “restricted” advice, as flagged by ASIC in its second FSI submission.
Treasurer Joe Hockey today announced the government will "carefully consider" the recommendations, seeking stakeholder feedback until March 2015.
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