Dealer group operations on royal commission agenda

The royal commission has released a background document that indicates licensees, independence and approved product lists will be high priorities for the upcoming hearings on financial advice.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry placed a number of documents on its website yesterday, providing background on the financial advice industry for consumers to peruse ahead of the second round of proceedings.

The documents draw heavily on public sources from ASIC, the Productivity Commission and Treasury to provide an overview of the topics it feels the public needs to know prior to the commencement of the hearings, such as the demographics and regulation of the industry.

It also specifically addresses the role dealer groups and licensees play in influencing the quality of advice provided to consumers.


“The AFS licensee of a dealer group (sic) may restrict, under their terms of appointment, the range of financial products their financial adviser representatives can advise on through an ‘approved product list’,” the document explains.

“An [APL] may contain ‘in-house’ financial products, as well as external financial products. Where such restrictions occur, membership of a dealer group will influence the financial advice provided, as the range of financial products the adviser can provide financial advice on is limited … The [APL] within a dealer group is usually not publicly available.”

The section goes on to detail ASIC’s latest report on vertical integration, which found that in the post-FOFA period of 2015-17, 68 per cent of all client funds across these businesses were invested in financial products owned and operated by related entities.

It also details the definition of independence as laid out in section 923A of the Corporations Act 2001 and the Productivity Commission’s estimates of levels of alignment to the major institutions.

The singling out of these topics in its background document indicates the commission will be keen to place the dealer group model under considerable scrutiny, analysing the role of licensees and parent companies in influencing misconduct.

AMP and its dealer group subsidiaries AMP Financial Planning, Charter and Hillross will be the first to face royal commission cross-examination in the next round of hearings, followed by CBA and its Commonwealth FP and Count Financial businesses.

The royal commission also uploaded documents on adviser education and professional standards and an overview of financial products on the market.

The three background documents can be accessed here:

  1. Background Paper 6 (Part A): Some Features of the Australian Financial Planning Industry
  2. Background Paper 6 (Part B): Education and Training Requirements for Financial Advisers
  3. Background Paper 6 (Part C): Financial Products Available to Retail Investors
Dealer group operations on royal commission agenda
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