ASIC recommends aligned advice be labelled as ‘restricted’ advice
The Australian Securities and Investments Commission (ASIC) has recommended that financial advisers aligned with an institution label themselves as a ‘restricted advice' business or provide prominent statements about their relationship with the institution and any limits on products the adviser is able to recommend.
ASIC made the recommendations in its second submission to the Financial System Inquiry where it stated that vertically integrated businesses were common in banking and funds management. It also stated there was no requirement "for advisers to offer independent advice, or for advice groups to be structurally separate from product manufacturers".
In providing context for its recommendations ASIC cited research that showed consumers were uncertain about the independence of advice provided by vertically integrated planning groups
The regulator stated in its submission that the "inherent conflict of interest created by vertical integration" may not be obvious to consumers, particularly where the advice business and parent institution operated under different licences and business names.
ASIC also stated that while best interest duties applied to the provision of personal advice there was no requirement to review all products available in the market before making an advice recommendation and neither were there restrictions on providing advice on a limited approved product list of inhouse products.
ASIC said the current development of an adviser register could also include disclosure of the ownership of a planning business alongside qualifications, work history and disciplinary history.
AUTHOR
Jason Spits
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