Will the FPA’s conflicts code result in a change to remuneration policies? Does it go far enough? Or are the majority of planners already compliant? Money Management investigates.
Andrew Creaser, deputy managing director, Genesys Wealth Advisers
“There will be no change to our remuneration policies as a consequence of the code. If we change it will be for entirely different reasons.
“As a group, we have never taken the view that advisers should be incentivated to tow the company line. We should be paid for the services we provide, and they should be paid for delivering advice, and product should be incidental to the whole process.
“I think there are many dealer groups that should change as a result, but history will be the only test of what actually does change.
Indy Singh, managing director, Fiducian
“I met Sarah Brennan when she came around and one of the things she said to me was ‘you disclose too much’.
“If you lose your ethics and your integrity you can forget it. People may get away with it for some time, but when you’re a public company and you’ve got so much at stake there is no way you would take any chances with conflicts. So everything that could be perceived as a conflict has got to be disclosed.”
“We have not changed anything because we already have all the compliance procedures and complaint handling procedures. Everything here is documented.”
“We reward our advisers and it’s fully disclosed.”
John Van Der Wielen, investment and insurance managing director, HBOS Australia
“Firstly, I do support the conflicts code. Secondly no, it won’t impact on St Andrews because we already behave in that way.
“With our HBOS investment product, if you walk into a BankWest branch and ask for it you know what you’re getting, just like if you walk into a Westpac branch and ask for a mortgage product. If you don’t want complex advice, why pay for it?”
“But when you walk into a St Andrew’s practice for financial planning advice, we only use the Navigator platform so you know you’ll get independent advice. We don’t have any of our products across the Navigator platform.
“But if we did, and the transaction was clearly justified and disclosed, that would be okay — but we have no intention of putting our HBOS investment product on any platforms anyway because it would up fees and charges and we’d become less competitive.
“As for paying higher trails for placing money into an in-house product, we’re not a supporter of that.”
Senator Nick Sherry, Shadow Minister for Superannuation and Intergenerational Finance, Banking and Financial Services
“It’s certainly a step in the right direction. However, it fails to deal with the core issue, which is trail commission. And that is the central issue that at some point in time planners will have to come to grips with.
“We don’t have clear disclosure, we’ve got a disclosure-based regime which is paper work-heavy, with disclosure documents that are largely useless because they are unreadable — that’s not the planner’s fault I might add. That’s the Government’s fault.
“What we need is a dual track. We need a radically simplified disclosure regime combined with further competitive changes that fully expose commission-based selling to much more competitive pressure because commission-based selling is not very competitive.”
Andrew Campbell, national compliance manager, Shadforths
“We haven’t had to make any changes.
“I think that we have seen in the past complex structures to reward or encourage or promote investments. And I think that, particularly with FSR, income flows very strongly through the dealer group, and then the dealer group pays to the advisers. So I think that we’ve seen the complexity reduced.
“I think some dealers groups have had difficulty in dealing with those complex structures. So I wouldn’t be surprised to see those complex structures simplified.
“And I think that would tend to reduce conflicts, in the sense that you would get simple remuneration paid through the dealer group to the adviser as a result.”
Brett Himbury, chief operating officer distribution and corporate, Asteron
“Firstly, I should stress we are 100 per cent compliant with all of the code’s obligations to date, which is a really important starting point and we continue to make sure that is the case. We are participating in the discussion in industry and as a result of that we will continue to review our remuneration polices as that debate unfolds.
“I think the debate is getting too focused on institutional ownership. The provisions of the code don’t only apply to institutional ownership, but I believe this is not fully understood in industry. The issue of ownership and the subsequent impact on remuneration policies is being diluted by the debate focusing on institutional ownership.
“I have a very strong view it is about ownership per se, not only about institutional ownership. Every owner of every financial planning business in the country has an obligation to ensure that they deliver high quality services to their clients and that their business appropriately drives a profit.
“So any change in remuneration shouldn’t just be applied to institutional ownership but to all owners of all financial planning businesses.”
Ronald Ogilvie, general manager, IFA Securities
“We can’t call ourselves independent if we receive even a dollar of brokerage even though the client fully knows about it. So it makes it harder for us at times to get across our point of differentiation, and then some of the definitions of conflicts of interest are tough.
“Business is business, everyone has a conflict of interest somewhere along the line… From our point of view, we don’t have a problem disclosing what we do. I think smaller groups in some ways can be more commercial; we just tell people and most of our clients accept it.
“I think it is the bigger groups that will have more issues because they’re also more scrutinised and also I think they do have more genuine conflicts of interest, but from their point of view I think what they should do is say ‘well this is our business model and it appeals to a lot of people’ rather than saying ‘we’re the same as the independents’; they’re not, and that’s fine. But it will have more impact on them because they have more to disclose and explain.”
Andrew Waddell, general manger, AXA Financial Advice Network
“The principles are beginning to take shape and if it leads to more people engaging advisers it will be a great outcome.
“We will have to [make changes] because we have many of the things they mention. Of course, we are already working on ways to address those.
“It won’t be possible to have biased licensee terms or buyer of last resort and, as it currently stands, we do. So should the principles be adopted, we’ll need to change those.
“What became pretty obvious was that there are a whole lot of instruments used in the marketplace and that’s why it became a principles-based approach, so you can assess what you’re doing against principles rather than trying to close off any particular type of activity because it became pretty obvious fairly early that it wasn’t about trying to manufacture some sort of competitive advantage. It was about genuinely addressing a concern that had been raised by the regulator and at times spoken about by consumer groups.
“I wouldn’t say it’s a big change though, it’s more a part of an evolution.”
