Regulation missing on separating advice from products
The financial services sector still lacks regulation that requires advisers to identify when they are providing independent advice and when they are selling products, a law firm partner said.
Hall & Wilcox partner Harry New said this culture is entrenched in the advice system and wondered if there is a way of separating sales from advice so that investors know where those that are distributing products are coming from.
“At the end of the day we see with FOFA (Future of Financial Advice reforms) that it encouraged vertical integration to a large extent where large banks and wealth management organisations built distribution.
“Conflicted remuneration regulation did not change this, although the best interest duty was thought to be sufficient to manage any conflict,” New said.
New wondered if it was possible to have people who just sell products without providing advice.
“At the end of the day anybody who’s providing an opinion that would influence a reasonable retail investor in acquiring a product would be considered advice,” he said.
“So I wonder whether you could actually have a different category where a person is not really providing advice but is just representing the issuer in respect of their products.”
New also questioned if regulation has gone far enough to place the disclosure onus on the adviser so that conflicts of interests are brought to investors’ and clients’ attention.
“Some may argue that in a democracy, people should be given choices and therefore disclosure is the correct medium to bring things like conflicts to their attention rather than saying certain types of investors shouldn’t be allowed to invest in certain products.”
Recommended for you
Australia’s largest licensee has seen the biggest number of adviser losses over the past week, while the expected wave of new entrants has boosted overall adviser numbers.
Iress has increased its forecast adjusted EBITDA by $5 million for the 2023/24 financial year in light of the sale of its platform business to Praemium and hinted at a return to dividend payments.
With just 30 per cent of Australians knowing their superannuation balance to the nearest $1,000, Findex has emphasised the role of financial advice in addressing the critical super knowledge gap.
New Insignia Financial CEO Scott Hartley has detailed the impact of the Godfrey Pembroke exit and the progress in resetting its financial advice model on its latest quarterly results.
