Westpac has rejected the separate labelling of institutionally aligned financial planners stating the existing Future of Financial Advice (FOFA) legislation provides the same legal duties and disclosure requirements for all advisers at an individual level.
In its submission to Financial System Inquiry (FSI), Westpac also stated that any distinctions between advisers based on their access to products were simplistic and a poor predictor of an adviser’s ability to provide adequate advice.
Westpac stated that any further introduction of regulatory distinctions between advisers could be misleading if interpreted incorrectly by consumers. At the same time current regulations already restrict the use of 'independent’ to planners who do not receive commissions nor any form of volume based payments and are not restricted in their product recommendation and are free from conflicts of interest in that area.
The bank, which has four planning groups with about 1200 planners, stated that all planners in the Australian financial sector were compelled under FOFA to act in the best interests of their clients and this was “one of the key strengths of the Australian regulatory system emerging from the introduction of the FOFA reforms”.
The submission added that while FOFA required all advisers to document the details of their licensee, remuneration arrangements and any relationships with product issuers that influence financial advice more transparency was required “to make it abundantly clear under what license an adviser is operating and who the owner of that license is”.
Westpac also rejected the implication that non-aligned advisers had greater freedom in their product recommendations stating that aligned advisers are often able to draw on institutional resources to access a greater number of financial products.
However it stated that the no adviser was truly able to survey the whole market given that more than 4100 managed funds were currently on offer in the market with even the best resourced advisers unlikely to be able to access more than 1000 funds.
“As a consequence, any business model or product-based distinctions are irrelevant at best and misleading at worst. It is meaningless in terms of its description of an individual adviser’s flexibility to provide advice across a range of subject areas and financial products,” Westpac stated.
“It is also potentially misleading by creating the implication that one type of adviser owes a higher legal duty than another – depending on their business model.”
