The FPA has said it would support an ASIC move to protect the term ‘independently-owned’ under the Corporations Act, saying there are some in the industry who use it to mislead clients.
ifa reported last month that the corporate regulator was seeking external legal advice to determine whether it should prohibit advice firms from calling themselves ‘independently-owned’, unless they meet the Corporations Act definition of independence.
FPA chair Neil Kendall told ifa he agrees with ASIC’s concerns, as some advisers use the term to try and bypass the legal definition.
“Work-arounds like 'independently-owned' and 'independently-minded' are designed to mislead consumers about independence. We think they should all be under the same definition,” he said.
“If there is going to be a definition, it needs to be thorough. So incorporating independently-owned [into the Corporations Act] makes absolute sense.”
FPA chief executive Dante De Gori echoed Mr Kendall’s sentiments, adding that there is a misalignment between what consumers and advisers believe independent to mean.
“I think that is more of an education piece and we need to ensure that consumers are aware,” he told ifa.
“This then also means we shouldn't be confusing the issue. Therefore the term independent, or any like terms around it, should only be used by those that actually meet the definition of the Corporations Act.”
ASIC also recently said it was looking at whether asset-based fees are conflicted, and if advisers who charge clients this way can call themselves independent.
Mr Kendall, however, does not agree with the concern.
“We're not prescriptive about the way fees are collected. The definition to be independent now is quite a significant challenge for a lot of people,” he said.
“If you meet the criteria and it is clear to consumers, you should be able to use the term.”
Still, Mr De Gori warns that just because a fee model is legal, it does not mean it is always conflict-free.
“I think with any fee structure, irrespective of whether it may be legal or not, every financial planner and financial planning firm and licensee must consider the way in which fees are used and how financial planners are remunerated,” he said.
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