Eliminating conflicts: The advantages and caveats of being independent

Andrew Saikal-Skea, founder of Saikal-Skea Independent Financial Advice, is an adviser familiar with the “independent” label.

“For me, being independent is really important because I just don’t want to have anything in between me and my client,” Saikal-Skea said on The ifa Show.

“I’m just saying [to my clients] there is no conflicts of interest. I’m completely independent and I’m free to the best advice.”

Saikal-Skea has also found that in the wake of the royal commission, the independent label has helped create a greater sense of trust with his clients, particularly as advisers and the broader financial industry struggle with what he calls a “branding issue” that can make people unsure as to whether there’s “undue influence in the advice”.

However, he noted that independent advice is not an automatic guarantee of quality: “Just because the advice is independent, it doesn’t mean that it’s good. It just means that it’s not conflicted. Same thing, just because advice isn’t independent doesn’t mean that it’s bad. I also don’t think that everyone being independent is practical in a lot of ways.”

For Saikal-Skea, Australia’s licensing system is an obstacle to having more independent advisers.

“I don’t think that we have a licensing regime that probably allows enough financial advisers not to have some linkage with product providers,” he said.

This means often having to jump through hoops and loopholes to meet the “strict” legal definition of independent.

Being authorised through a large-scale licensee, in Saikal-Skea’s view, also poses obstacles for removing conflicts of interest from your business.

“If you work for a licensee that owns a product and has a very restrictive APL and they’re pushing in a certain direction, the conflicts are very high compared to if you [if] another adviser on the licence is charging commissions and therefore you can’t say you’re independent. Your conflict of interest is very low – there’s a scale,” he said.

Though “independence” might signal in some a quasi-romantic notion of operating a financial advice business, the caveats and considerations that come with this practice method may simply not be practical for your operation.

For Saikal-Skea, the smaller number of clients he deals with also helps make an independent operating model workable within his business. Top of Form