Call for aligned advisers to be renamed 'agents'

A boutique practice principal has blamed vertical integration for corruption within the industry and called on the government to create a new description for 'institutionally-aligned'.

In a submission to the 'scrutiny of financial advice' inquiry, Ashley Pattinson, principal of Sydney-based boutique Pattinson Financial Services, said recent scandals regarding financial advice were rooted in systemic issues rather than wrongdoing by individual financial advisers.

“So much of the concerns the committee seeks to address stem not so much from the behaviour of advisers as it does from the tension between compliance with regulation and the need for return on investment by those companies with a vertically integrated model,” his submission stated.

He suggested the dominance of large institutions in financial advice meant advisers were encouraged to push certain products.

“The banks and AMP not only control the majority of investment and insurance manufacturing in this country they also own the majority of the channels through which their products are distributed,” he said.

“It is therefore reasonable to expect that product recommendations made to clients of those distribution channels will be recommended products manufactured by the owners of those channels.”

Mr Pattinson called for the development of the term “agents” for those practitioners that sell the products of the “agency” they are aligned to.

He also suggested that advisers without ties to product manufacturers should be described as "brokers". 

“Brokers would need to provide transparency in their dealings and could not participate in any arrangement which provided any form of inducement for recommending any one product,” he said.

“Importantly broking channels could not be owned by a manufacturer, or at least have management that is completely independent of the manufacturer.”

Mr Pattinson suggested that identifying advisers like this would “simplify the landscape”, giving clients more information to make a “clear choice”.

He said current consumer protection laws were adequate but the structure of the industry had to be addressed.

“If we simply stopped trying to use regulation as a way to force change on a system which is designed to work against the change being imposed, we could make everyone's life a whole lot easier,” he said.

“It's the structure that's the problem. Remove the conflict and you provide greater transparency,” he said.

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