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Vertical integration makes clients the ‘ultimate loser’

Vertical integration makes clients the ‘ultimate loser’

Yes

The findings of ASIC’s review into vertical integration demonstrate the need for  “clear delineation” between manufacturers of financial products and those that recommend them, according to robo-advice firm Stockspot.

A report released by ASIC last Wednesday found 68 per cent of client funds across the licensees owned by AMP, ANZ, Commonwealth Bank, NAB, and Westpac were invested in in-house products.

Commenting on the regulator’s findings, Stockspot chief executive Chris Brycki said the figures were to be expected.

“ASIC's findings in its review of financial advice that 'conflicts of interest are inherent in vertically integrated firms' are unsurprising but a step closer to acknowledging the financial industry needs to change – now,” he said.

“There needs to be a clear delineation between those producing financial product and those selling them, without separation alongside a flawed remuneration system, the ultimate loser is always the end consumer.”

Mr Brycki said it was important that investors receive “fair and unbiased financial advice”, but many are instead recipients of “product pushing by sales people”.

“We need urgent structural reform in the banking and financial industry to fix the problems caused by the vertical integration of banks and their dominant market power,” he said.

“We need to ensure that consumers are protected, advisers are better educated and incentives are aligned to promote the right types of behaviour.”

The Financial Services Council also issued a response to ASIC’s report, questioning the approach used by the regulator in its investigation into product bias.

Vertical integration makes clients the ‘ultimate loser’
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