ASIC should follow the UK’s lead and adopt ‘tied’ or ‘restricted’ advice that deals exclusively with in-house product, says NMG Consulting.
In his latest Trialogue note, NMG Consulting partner Oliver Hesketh made the case for financial advice that is exclusively tied to in-house product.
The 'tied' advice regulatory model, which operates in the UK as 'restricted' advice, involves a "very clear understanding between the customer and the adviser that only in-house product will be offered", Mr Hesketh said.
At present, holistic advice is prohibitively expensive for the vast majority of Australians unless it subsidised by a vertically integrated business model, he said.
"If vertically integrated advice models can no longer be tolerated, or the cost of regulation renders it unfeasible, that means around 900,000 Australians would be left without any financial advice at all," Mr Hesketh said.
Intra-fund advice, on the other hand, is of limited value to super fund members, he said (it doesn't even allow the adviser to consider the superannuation balance of their spouse).
The solution could be to adopt a similar 'tied' regulatory model as the UK, which would "allow industry funds to offer a valuable, lower-cost proposition to more members than they can realistically target today", Mr Hesketh said.
"It’s difficult to believe the regulator might entertain a tied advice regime right now, but in our view at least, consumers would be well served by a third regulatory framework for financial advice that recognises the cost of maintaining true independence in advice may be more than the average Australian is prepared to pay," he said.
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