In a submission to the ‘scrutiny of financial advice’ inquiry, Ashley Pattinson, principal of Sydney-based boutique Pattinson Financial Services, said recent scandals regarding financial advice were rooted in systemic issues rather than wrongdoing by individual financial advisers.
“So much of the concerns the committee seeks to address stem not so much from the behaviour of advisers as it does from the tension between compliance with regulation and the need for return on investment by those companies with a vertically integrated model,” his submission stated.
He suggested the dominance of large institutions in financial advice meant advisers were encouraged to push certain products.
“The banks and AMP not only control the majority of investment and insurance manufacturing in this country they also own the majority of the channels through which their products are distributed,” he said.
“It is therefore reasonable to expect that product recommendations made to clients of those distribution channels will be recommended products manufactured by the owners of those channels.”
Mr Pattinson called for the development of the term “agents” for those practitioners that sell the products of the “agency” they are aligned to.
He also suggested that advisers without ties to product manufacturers should be described as “brokers”.
“Brokers would need to provide transparency in their dealings and could not participate in any arrangement which provided any form of inducement for recommending any one product,” he said.
“Importantly broking channels could not be owned by a manufacturer, or at least have management that is completely independent of the manufacturer.”
Mr Pattinson suggested that identifying advisers like this would “simplify the landscape”, giving clients more information to make a “clear choice”.
He said current consumer protection laws were adequate but the structure of the industry had to be addressed.
“If we simply stopped trying to use regulation as a way to force change on a system which is designed to work against the change being imposed, we could make everyone’s life a whole lot easier,” he said.
“It’s the structure that’s the problem. Remove the conflict and you provide greater transparency,” he said.
I am an Agent but I don’t tell anyone. I like to think of myself as a Secret Agent. 🙂
Merry xmas all.
Merry xmas to you too Enis, and to all. all in the name of constructive debate!
[quote name=”Anti V-I”]Only because your clients are among the many australians still in the dark, luckily the journalism conducted by the SMH and IFA this year is changing all that.[/quote]
Actually my licensee is prominently displayed and I am proud of this, I welcome you to visit in person to see how a real adviser behaves.
Merry Christmas to all!
I recently left a non-aligned dealer group and joined an aligned group. The one i left was becoming more conflicted than the one I joined, squeezing their APL to help boost their revenue from badged platforms and managed funds….lovely stuff. Non-aligned…pfft…the term should be banned. It’s deliberately misleading.
Only because your clients are among the many australians still in the dark, luckily the journalism conducted by the SMH and IFA this year is changing all that.
And when that authorised rep is of an independent AFSL, it somehow makes the adviser good, clean and honest? please…
Being vertically aligned is not a bad thing, as long as I still have the freedom to provide advice with any product I wish to and it meets the clients raw goals, where I receive my CPD points, training and compliance does not matter. I am paid on a fee for service manner and have no issues to keep clients in existing funds – I know what my value proposition is.
Saying I’m independent to me isn’t really a value add to a client, like a lot of you wish to portray.
Yes Enis, but you all write “authorised rep of Charter” or “authorised rep of Fin Wiz” or “authorised rep of Genesys” and nowhere, except maybe in some disclaimer is there a mention of who owns that company (and especially not why i.e. distribution). That, my dear watson, is the crux of all of the industry’s problems – disrtibution masked as advice, and 15,000 “financial planners: drinking the kool aid
To any self-employed financial advisers who are working under a bank AFSL – the writing on the wall. Get away from the banks.
Start looking into getting your own AFSL or joining a non-aligned license. It’s not as big a deal as you think it is…maybe the first step is attending the IFA Business Strategy Day…
To those who are going to respond “Why should I?”. Because it looks bad. This is completely about perception by the public. We are perceived as compromised when linked to product providers. We know it’s not reality but they don’t. Don’t cry about it. Do something about it. It’s time.
Surely, when we write “Authorised Representative and Credit Representative of XXX Pty Ltd” on our email signature, letters sent to clients, statements of advice, Financial Services and Credit Guides, signage and website, it is quite clear of our relationship? Oh what about all those fees which are also disclosed at the back of the SOA? OHH and the Fee disclosure statements? This is more than what a used car sales man has to provide…
What a great idea. How about “sponsored by…”
I agree with a number of comments here where aligned products make up only a small % of a licensees APL. If non aligned planners want a name definition as mentioned by Enis, a non aligned adviser will need an APL that includes every single available product on the market. Otherwise they are compromised because they cannot recommend all possible products to the client. Heaven forbid one of those products not listed on their APL just might be the best product for the client. So unless they are prepared to do that, they cannot be truly non aligned. I also hope that none of the non aligned planners use a platform, particularly a white label platform that doesn’t disclose the true platform provider. Unfortunately using a platform makes you aligned to the platform provider & their product lists. It is a complicated problem. So as mentioned lets work together to move the industry to a profession and support each other to provide better client outcomes & to get rid of the shonks.
Enis, the only reason non-aligned advisers have copped it from ASIC is because until the CBA calamity blew up in their silly public service faces they didnt have the guts to take on the real crooks inside the boardrooms of the big banks. This website has reported in 2015 asic will be focusing more on the aligned, Australia is ready to see what the seedy underbelly looks like.
And finally, non-aligned advisers should get off their high horses; Lets not forget that the vast majority of advisers whom ASIC ban do not actually come from an aligned space.
Just because you have a independent AFSL will not mean you are abreast of ALL of the thousands of products from every single product provider, you will, just like an aligned adviser stick to what you know best, so how is that different?
We need to once and for all put all the fighting and name calling behind us and remember its all about the client outcomes, there are plenty of Australian’s who NEED advice, we don’t need to bad mouth each other to steal the existing clients.
just my 2c !
I really don’t understand the thinking behind some individuals, when our industry is trying to turn into a profession, we still believe that throwing mud at each other is acceptable, whether you are aligned, industry fund or non-aligned. IF you have the intention to do wrong by a client YOU will.
It’s not just you “No Thanks”. My company and I are also AR’s of an AFSL that is bank owned. In terms of product recommendations, the “owner bank’s” products account for less than 13% of my business and only one provider’s products (obviously not the AFSL owner’s) make up more than 15% of my business. Does this make me an “agent” or a “broker”. And to Anti VI, no, it is not a blanket case of cheaper/easier to recommend “in-house” nor of whether someone is a good bloke or not. Good and bad advice can be found in all business models (from seemingly good blokes, or not so good). We need to change the focus of this debate from remuneration models to quality of advice.
Get off your band wagon Mr Pattinson and start thinking like an adviser rather than some prudish no all who thinks because they are not V.I. they are better than everyone else. In 30 years of running my own business have I ever been pressured to sell products of the group I am aligned to.
How can a professional adviser ignore the efficiency of a fully implemented solution ? This fear of vertically integrated businesses is misplaced. A professional will recommend the most appropriate solution to a client. This may involve tailored portfolios or alternatively fully implemented portfolios. Arguing against fully implemented approaches suggests a bias towards acting in the best interests of ones ego rather than the best interests of clients.
Those who live in glass houses shouldn’t throw stones. Weren’t Storm Financial also independent and just one of many “independent” firms that caused untold damage to their clients. Quality advice is determined by the professionalism of the individual adviser, not how they are licenced. No more – no less. The sooner we all recognise this and stop beating up on each other in the media, the sooner our profession can move forward.
Mr Pattinson, taking such a simplistic approach ignores the complexities such as No Thanks below. Our licensee is owned by a product provider, but we have never recommended or sold any product owned by them, nor do we receive any pressure or incentive to do so.
Should we be called agents still?
simple legislate the you need disclose on your business cards, marketing material soa etc that you either aligned or non aligned ad visor its that simple gets rid of any confusion, then let the client decide
No thanks – is it not cheaper/easier to recommend in-house though? you might be a good enough bloke to manage the conflict, doesnt mean its not there
Is it just me or do people within out own industry not understand the structure of many businesses?
For instance, I’m an authorised rep of a “bank aligned” dealer group, however we are all self employed – not employees – and I have no hesitation in recommending products that aren’t “owned” by the bank.
There is a place for the term ‘agents’ in our industry but please do not put us all in the one basket and say all bank aligned groups should be placed in this basket.
Bank planners are more likely to fit in this basket.