The corporate regulator’s longstanding review of some of Australia’s largest financial advice providers has found alarming levels of in-house financial product recommendation by advisers.
The review – which examined advice provided by a number of institutionally-aligned licensees from 2015 to 2017 – found that 68 per cent of all client funds across these businesses were invested in financial products owned and operated by related entities.
The finding comes despite the fact that 79 per cent of financial products across the reviewed licensees’ approved product lists were external, with just 21 per cent made up of in-house products.
While the behaviour differed across licensees, “in most cases there was a clear weighting in the products recommended by advisers towards in-house products”.
Moreover, a review of samples files where advice to switch products to an in-house product was provided found that in 75 per cent of cases the FOFA best interests duty was not complied with.
ASIC will now “consult with the financial advice industry” on a proposal to “introduce more transparent public reporting on approved product lists, including where client funds are invested, for advice licensees that are part of a vertically integrated business”, said a statement from the regulator.
The licensees reviewed in this investigation were AMP Financial Planning, Charter Financial Planning (AMP), Millenium3 (ANZ and soon to be IOOF), ANZ Financial Planning, Commonwealth Financial Planning (CBA), Count Financial (CBA), GWM Adviser Services (NAB), NAB Financial Planning, Securitor (Westpac) and Westpac Financial Planning.
However, ASIC deputy chairman Peter Kell said any remedy would likely involve licensees beyond those mentioned.
Several firms have been impacted by the corporate regulator’s action.
Super funds must now have a retirement income strategy in place.
Vanguard has called for a complete overhaul of the advice industry.
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