Are asset consultants caught in the same ‘independent’ trap as financial advisers?
Asset consultants working with wholesale clients should be just as constrained as financial advisers in using the term “independent” contrary to testimony given to a Parliamentary Committee by the Australian Securities and Investments Commission (ASIC).
That is the bottom line of legal opinion following the questioning of ASIC over the ability of industry funds-owned asset consultant Frontier Investment Advisers which describes itself as “Australia’s leading independent asset consultant”.
In the wake of the ASIC testimony before the Parliamentary Joint Committee on Corporations and Financial Services, financial advisers took issue with the regulator’s suggestion that Frontier could use the term “independent” when financial advisers could not.
They pointed to Section 923(a) of the Corporations Act dealing with restrictions on the use of certain words and expressions and said that it did not expressly solely cover retail financial advice delivered to a financial adviser whilst excluding wholesale advice.
ASIC commissioner, Danielle Press was challenged on the issue by NSW Liberal back-bencher, Jason Falinksi and claimed that the role fulfilled by an asset consultant was distinctly different to that of a financial adviser, prompting him to place a question on notice to ASIC asking to precisely define that different in the context of using the descriptor “independent”.
Asked for a legal view on the issue, partner with specialist financial services law firm, The Fold, Simon Carrodus said that he believed the wording of Section 923(a) actually caught asset consultant alongside financial planners.
“The section 923A prohibition applies to any person “who carries on a financial services business or provides a financial service,” he said.
Press said during her testimony that she did not believe Frontier provided retail financial advice and that they were a wholesale business and would need to take on notice the company’s wording and get back to the committee.
However, she said that an asset consultant was something very different to a financial adviser.
Falinksi: “So if a financial adviser calls themselves an asset consultant they can call themselves independent?”
Press: “That is not what I said Mr Falinksi. At the end of the day an asset consultant fulfills a certain role in the financial services industry which is different to that of a financial adviser. As far as I am aware the independent requirement pertains to the financial advice space, not the asset consultant space.”
Falinski: “I’m going to put on notice a question asking you to define for me the difference between what the difference between asset consultancy is and financial advice.”
Recommended for you
With the highest number of candidates in a year sitting the latest financial advice exam, a surge of new entrants are expected in the coming weeks, according to Wealth Data.
AMP has launched a range of five diversified index managed portfolios on its North investment platform, targeting a younger client demographic.
An NSW adviser, who advised over 120 clients after falsifying her financial advice exam results, has been permanently banned by ASIC.
ASIC has released the results from the latest financial adviser exam, the first to be run since changes to its structure earlier this year.
