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Insto dealer groups on high alert

ASIC has dispatched two separate investigation teams to ramp up its surveillance of product flogging and dodgy advice in vertically integrated advice businesses.

In its submission to the Senate’s ‘scrutiny of financial advice’ inquiry, the corporate regulator announced it will be running a formal surveillance project until June, focusing on “vertically integrated businesses which combine product manufacturers with advice groups”.

ASIC’s Investment Managers and Superannuation team will be examining management of conflicts of interest while the Financial Advice team will be on the lookout for product mis-selling and advice failures.

However, the submission also argues there are “benefits to vertical integration” – naming the ability for these companies to draw on greater resources for the purposes of consumer compensation, and reminds parliament that there is “no requirement in Australia for advisers to offer independent advice”.

“While required to act in the best interests of clients when providing personal advice, and to prefer the interests of the client over their own interests or those of related parties, advisers are not required to review all products available in the market before making a recommendation and are not restricted from advising on a limited range of house products under an approved product list,” the submission states.

It also resubmitted its previous suggestion that product-aligned advisers be required to describe themselves as “restricted” or otherwise make it clearer to consumers that they have limitations on their product recommendation advice.

The adviser register – which will include information about the owner or parent company of an adviser’s licensee – will also go some way to eradicating consumer confusion, the submission states.

ASIC chairman Greg Medcraft announced in late 2014 that the regulator will be focusing its 2015 surveillance on the six largest financial planning companies.

Interested in finding out more about non-aligned advice? The ifa Business Strategy Day will provide the answers: http://www.businessstrategyday.com.au/