Consumers don’t understand 'independent advice' label
Financial advice consumers are unlikely to understand the criteria for advisers labelling themselves ‘independent' with calls to distinguish between independent and aligned advisers unlikely to clarify that or adequately manage conflicts of interest according to KPMG.
Rather emphasis should be given to managing conflicts under current law with obligations to do so equally applied to independent and aligned advisers
The large scale accounting business made the comments as part of its second round submission to the Financial System Inquiry stating that it was "unlikely that many consumers understand the criteria for using the restricted words ‘independent, impartial and unbiased'" as they are defined within the section 923A of the Corporations Act.
KPMG also stated that it was unlikely that consumers understood what these terms indicated about the way an adviser is remunerated and their relationship with product issuers.
The submission cited research conducted by the UK Financial Services Authority and published in November 2011 after the implementation of its Retail Distribution Review which found that around 40 per cent of survey respondents could not tell if their adviser was independent or how that effected the ability to provide product advice from single or multiple providers.
KPMG stated that more emphasis should be placed on the adequate management of conflicts of interest which currently exist under general obligations for Australian Financial Services licensees and specifically under the best interest duties and conflicts priority rules within the Corporations Act.
The comments run counter to those of the Australian Securities and Investments Commission which has called for institutionally aligned advisers to be labelled as restricted advice providers.
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