ASIC clarifies rule around ‘independent’

The Australian Securities and Investments Commission (ASIC) has obtained legal advice and clarified its position on the use of restricted terms relating to the independence of financial advisers.

The regulator now says that if a financial adviser does not receive any commissions or volume-based payments, or other gifts or benefits and has no conflicts of interest or influence from any product issuer, then they can describe themselves as being “independently owned”.

However, if the financial adviser does receive commissions or operates with conflicts of interest, then they will not be permitted to use the term “independently owned” or other like words or expressions.

Related News:

Commenting on the clarified position, ASIC deputy chairman, Peter Kell said the independence of financial advisers was an important issue for consumers and investors, and might sway their decisions about their investments or their choice of adviser.

“Consumers must not be misled into believing that an adviser is independent and free from influence when that is not the case. This is why the Corporations Act puts strong conditions around the use of 'independent' and similar word and phrases,” he said.

Kell said ASIC acknowledged that there has been uncertainty in the financial advice industry about whether terms such as “independently-owned” and “non-aligned” were restricted terms under s923A and in light of that uncertainty, the regulator would provide a facilitative compliance period of six months so that advice firms that do not satisfy the conditions in s923A could change websites and documents to remove terms such as “independently owned”, “non-aligned” or “non-institutionally owned”.

The facilitative compliance period will not extend to contraventions of s923A where the specified restricted terms “independent”, “impartial”, and “unbiased” are used. ASIC considers that there has been no uncertainty about how s923A applies to these terms and ASIC will continue to take action against financial service providers for using these terms in breach of s923A.




Related Content

Last resort compensation – is anyone listening?

Mike Taylor writes that a broad cross-section of the financial services industry has voiced its concerns about a compensation scheme of last resort bu...more

Designing for humans in wealth management

Wealth management firms must adapt their model, infrastructure, and workforce to ensure customer interaction is a low-friction, enjoyable experience, ...more

Persevering through a year of volatility

Global Equities (Regional & Emerging Markets)WinnerLazard Emerging Markets FundFinalistsAberdeen Emerging Opportunities Fund  ...more

Author

Comments

Comments

The original intent of the banning of the use of the word "independent" was about identifying who received commission. Now that commission is banned, AND all fees and income have to be disclosed to the consumer, repeatedly, the legislation should be reworded to help consumers understand who has genuine links to product providers (ie provides their licence to operate, like the banks and industry fund do for their advisers), and who doesn't.
Let's hope that the hopelessly conflicted ASIC approach is really about forcing the politicians hands to move on this, rather than just another protective measure for their best friends, the industry funds and the banks.

This is nothing more than a hateful, anti-adviser agenda from a bureaucrat who never bothered to get out into the real world to witness the hard work, passion and dedication I see every day in the non-aligned advice space. If Kell believed his own comments, he would immediately apply the same rule to industry fund product providers, who are suddenly using the word independent and accountants, most of whom have only one product to sell - their own, in-house SMSF service. To have those two groups marketing their advice as independent is laughable.

Add new comment