Yesterday, the corporate regulator announced that Findex Group Limited and Financial Index Australia (FIA) had each paid a $10,800 penalty after receiving infringement notices for “inaccurately” claiming they were independent and non-aligned.
A Findex spokesperson told ifa that the company had only described itself as ‘independently-owned’ and ‘non-aligned’ in order to convey that its business is majority owned by management and staff, and not by a bank or other financial institution.
“Once notified by ASIC that the use of these terms for this purpose was not permitted under the Corporations Act, Findex began to remove the terms and issued a corrective statement on its website. FIA also reissued its Financial Services Guide to the relevant clients,” the spokesperson said.
“We believe that we had addressed ASIC’s concerns in December 2015. In August 2016, ASIC issued two infringement notices and we have agreed to pay the notices of $10,800 each, bringing closure to this matter.
“We note that an infringement notice is not an admission of guilt or a finding and we did not intend to mislead or deceive clients as a result of using these terms.”
The spokesperson added that ASIC’s decision raises questions for the industry around whether the term can continue to be used, for example, in association names and industry conferences.
Yesterday, ASIC said it was concerned that Findex’s use of the words ‘independent’ and ‘non-aligned’ may have led consumers to believe the services were conflict-free.
The services being offered were likely to have been affected by commissions or other benefits received from the issuer of recommended financial products. There were also conflicts of interest arising out of Findex’s associations or relationships with issuers of financial products, ASIC had said.
In regard to Dean’s statement: “They (consumers) don’t care how advisers are paid or what the pedantic Corps Act definition of “independence”, I beg to disagree, consumers of advice want advice that is in their best interest and does not reply upon the SALE of a product. Commissions and other conflicted modes of remuneration encourage PRODUCT sales vs ADVICE. Clients seek out TRUELY INDEPENDENT advisers as they want to obtain advice and not be SOLD a product. Hence we would suggest from experience that consumers really DO CARE about how the advice is paid for and want those firms marketing themselves as INDEPENDENT to be INDEPENDENT (including under ASIC’s definition).
As you say Fergus, “consumers want advice that is in their best interest”. But method of payment does not ensure best interest, adviser professionalism and the statutory Best Interests Duty does. There are plenty of accountants who recommend negatively geared property and/or SMSFs, because they generate more accounting fees. This advice would fall within the ASIC definition of “independence”, yet in many cases it is not in the client’s best interest.
Conversely what about the situation where an adviser identifies that a client will need insurance costing $1,750 pa wholesale, with advice and service costs of $2,000 upfront and $500pa ongoing. The client baulks at paying $3,750 upfront and is likely to walk away uninsured, so the adviser offers an alternative payment mechanism via the commission system of exactly the same insurance priced at $2500 pa retail. There are no additional adviser fees as the adviser’s advice and service costs are paid from the insurer. The client has a more affordable upfront cost, and only starts paying more in aggregate after 5 years, all of which is thoroughly explained to them so they can make an informed choice. The additional aggregate premium paid after 5 years is the insurer’s reward for subsidising the upfront costs and carrying the risk of cancellation in the meantime. Consequently the client takes the insurance and is far better off than if they had consulted an adviser who does not provide the option to pay advice and service costs via the commission system.
The selection of insurer in this case was not driven by a conflict of interest. It was driven by the adviser’s professionalism and desire to provide the best outcome for their client, all within an overarching legal framework of Best Interests Duty. The concept that payment mechanism determines independence and best interests was always spurious, and with the introduction of BID is now totally outdated.
Whilst not related to the above other than it is important to get the specifics correct I am seeking some feedback on wording from an industry superannuation webpage I looked at today — can a super fund provide “personalised” advice without an SOA? My understanding is that a fund provider can provide intrafund advice and general advice but I would believe personalised advice would require documentation. Any thoughts?
I find it passing strange that some in our industry seem to think ASIC is the enemy while others of us understand the Corps Act and support what it’s trying to do, as well as ASIC’s role in protecting the public with far too little resources and far too much expectation upon it. George nailed it…
Most consumers want to easily find advisers who are not owned or controlled by financial institutions. They don’t care how advisers are paid or what the pedantic Corps Act definition of “independence” is. They want advice documents that are short, simple, and focused. They don’t want multiple pages of disclosures or disclaimers that they will never read or understand. They want to pay a reasonable price for advice, that isn’t inflated due to layers and layers of burdensome and expensive compliance which they ultimately end up footing the bill for. They want the regulator to quickly step in and act when there are isolated and obvious cases of advisers creating real problems (eg Storm), and let the honest majority of advisers just get on with helping Australians improve their lives.
ASIC and the Corps Act have failed Australian consumers in every one of these areas. All of these things could be readily achieved with less resources and complexity, not more. I don’t find it strange at all that many in our industry see ASIC as the enemy of practical, affordable, financial advice.
So it is minority owned by an institution ???
The Wayback Machine begs to differ. In their footer from mid-2015, it states:
[i]”Financial Index Wealth Accountants (FIWA) is one of Australia’s leading independent providers of retail financial planning, accounting and wealth management services.”[/i] i.e. exactly what the ASIC statement says.
Another example of a non-institution owned AFSL thumbing their nose at regulatory requirements that have been in place forever…a STORM in a teacup?
What nonsense, if you are an independent business not owned by another business or corporation then surely you are “independent”. ASIC just playing semantics and not focusing on the real issues.
What a joke this is. Perhaps ASIC staff should spend more time dealing with real issues in the financial services space. When you see the power and extent of the major banks in this space, and the consumer concerns that are evident in the continued calls for a Royal Commission, then there is good reason for Findex and others to want to put some space between themselves, the banks and their array of product manufacturers and aligned AFSL groups.
It would be interesting to see if ASIC had any suggestions as to what groups who arent aligned to the banks can call or describe themselves, or was it just slap them with a fine?
If they didn’t know they couldn’t use these terms, they probably shouldn’t be running an AFSL
Well said George! Nailed it.
Pretty sure that the term they can use is ‘independently owned’.
‘Independent’ is defined in s923a of the Corps Act. Pretty sure ASIC are enforcing that law here. As someone who ticks the box, I appreciate the work ASIC is doing here.