Yesterday, ASIC released its opinion that financial advisers who do not meet the strict criteria stipulated in s923A can no longer describe themselves as independently-owned or non-aligned despite ownership structures, after receiving “external legal advice” on the matter.
The development sparked considerable debate in the comments section, alongside an ifa editorial arguing that ASIC’s interpretation will reduce the competitiveness of the financial advice market and ultimately harm consumers.
Members of the AIOFP, most of whom are AFSL holders who have described themselves as independently-owned or non-aligned for decades, raised particular concerns about ASIC’s “clarification” and the impact it would have on their advisers and clients.
AIOFP executive director Peter Johnston told ifa that the association will now be formally lobbying the federal government and cross-benchers for repeal of the legislation.
South Australian senator Cory Bernardi, who recently defected from the Coalition to establish the Australian Conservatives party, is being sounded out a potentially sympathetic and influential ear in the Federal Parliament. Senator Bernardi ran a self-licensed financial advice practice in Adelaide before entering Parliament.
“What must be understood is that ASIC are the police of the industry who enforce the law, not the law makers,” Mr Johnston said.
“We need to convince the politicians that s923A is unworkable unless you circumvent the spirit of FOFA by using SMSF funds to sell direct property to clients.”
The lacklustre performance of CPA Australia’s s923A-compliant licensee, CPA Australia Advice, has demonstrated that the business model implicit in ASIC’s definition is not viable, Mr Johnston said.
Shartru Wealth chief executive and AIOFP member Rob Coyte, one of a number of licensees with whom ifa spoke yesterday, indicated his dissatisfaction with ASIC’s approach.
“[Section] 923A is archaic and needs to be updated to reflect that whilst an adviser may be remunerated different ways the disclosure requirement deals sufficiently with this,” Mr Coyte said.
“If we cannot differentiate ourselves from CBA by a meaningful term then the system is broken.”
ASIC has informed the AIOFP that its members will now only be allowed to market themselves as belonging to the association alongside an accompanying disclaimer.
The AFA has also expressed verbal support for amendment of the legislation, while the FPA has welcomed ASIC’s clear guidance.
IFAs need to truely unite and lodge a class action / legal fight against ASIC and the Banks.
Got to love the Liberal party and their so called mantra of “small business as the back bone of the country”. You can really feel their love. NOT!
Does it mean that a financial planning practice that is not owned by institutions, does not accept commissions/ percentage based fees could perhaps differentiate by calling themselves non-affiliated? Or is this now also a ‘restricted’ word? My guess is probably as good as yours….
Good job. I’m joining your association.
Me too!!
It seems you are wanting ASIC to do something any business should be able to do and that is communicate your proposition.
Not at all anon, what we want to be able to do is communicate our proposition free of interference by ASIC. Advisers who dont fit the narrow definition in the Corps Act of independant, dont describe themselves as such. But where advisers who have either gone to the effort of getting their own AFSL or have joined an AFSL that is free of bank, fundie or insurer ownership, they want the ability to promote that move. If independence is such a great thing, why is there such an impediment from ASIC (and you) for advisers looking to move towards a position that is conflict free? And as outlined below, if all insurers will be shortly mandated to pay the same comm rates, then there is no conflict based on the selection of an insurer and the level of remuneration received. Personally, I’ve long written insurance on a hybrid basis as i think that adequately rewards my business for not only the initial work done with clients but also the ongoing work. And i openly tell clients that i choose hybrid for the reason of longevity, that i want to be able to run a business that will be there for them in the years/decades to come. Not just for the smash and grab.
So your proposition is that you are independent? How does that differentiate you from the other independent advisers? I agree you should be able to advertise your business how you like I just question whether this is something only those in the industry really understand and the clients out there really don’t care or understand.
In stead of “looking busy” I would love to see ASIC divert attention to making real estate a financial product and getting rid of the property spruikers and the accountants and lawyers they consort with that suck mum and dad investors into situations they neither understand or that are in their best interest.
Mate, so true. If I want to do a client a favour and rollover $1,000 to consolidate their super (which I wont even charge additional $$ on) I need a detailed SOA… If I am a property spruiker I can flog a client an illiquid asset from $300,000 – $1,000,000+ that they need to gear into and get paid $30,000 – $50,000 to do it without needing to disclose this to them…. With no SOA….
We will soon need a new dictionary issued by ASIC that will give new meanings to words that have been in the English language for a very long time. These words are understood to mean certain things by the majority of the English speaking world.
Why is is that ASIC seem to think they are > the Oxford dictionary.
Is this nothing more than an attempt at defending ASIC’s support for the travesty that has ensued at CPA Australia?
When will the Bank and Institutional adviser be forced to clearly state on all their documentation and advertising material who are their true Bank & Institutional owners ?
That comment from Rob Coyte says it all “If we cannot differentiate ourselves from CBA by a meaningful term then the system is broken.”
Commissions on super and investments have been banned for a few years now. Commissions on insurance remain (for the time being) because it is cheaper for the vast majority of people to receive advice and pay for the policies they take out under a commission based system. In an age of government mandated commission levels, where all insurers must pay the same rate of brokerage (and as it is most pay about the same now anyway) there is no factor that influences the advisers decision apart from policy definitions, policy features, occupation gradings and price in relation to the individual client.
ASIC, simply looking a for a reason to justify their existence.
Hahahaha! YES indeed: “ASIC, simply looking a for a reason to justify their existence”. Most relevant comment in all of this methinks. Too sad. Insult to injury is that YOU and I and CLIENTS are paying the wages of all these self-absorbed cretins to ruin our industry and push changes which will clearly be to the DETRIMENT of CLIENT BEST INTEREST. Are we advisers the only ones seeing through the fog of this dystopian twilight zone? Seems to me we are. WAY beyond sad – for the clients mostly.