Client confusion over planner ‘independence’

Up to half of clients using bank-aligned financial planners think their adviser is ‘independent', according to research released by Roy Morgan.

The main area of confusion regarding the independence of financial planners occurs when the planner is branded differently to the institution that owns the advice group.

More than 50 per cent of clients using Commonwealth Bank-owned dealer group Financial Wisdom consider it to be independent, which is well ahead of the 21 per cent who consider Commonwealth Bank branded planners to be non-aligned.

Similarly, 48 per cent of National Australia Bank's Godfrey Pembroke clients think the group is non-aligned, compared to 15 per cent in the case of NAB Financial Planning.

Roy Morgan Research concluded planners belonging to all the major banks and labelled as such were generally understood to be ‘tied' rather than ‘independent'.

However, three of the major banks' own financial planning groups are largely perceived as independent by their clients, including Godfrey Pembroke, Financial Wisdom, RetireInvest (owned by ANZ) and Count Financial, which is owned by CBA.

"The ease of obtaining wealth products and the increase in people using the direct channel means that the retail funds management sector will increasingly rely on their adviser network and advice to retain customers, but at the same time be acting in the best interests of their client," said Norman Morris, Roy Morgan's industry communications director.

"With a large proportion of advisers being owned by fund managers the need for clients to understand the extent to which their adviser is independent will become critical and should not be confused by branding."

The research comes weeks after the Parliamentary Joint Committee on Corporations and Financial Services questioned the Australian Securities and Investments Commission whether it had concerns about potential conflicts of interest arising in situations where financial advice groups were owned by product manufacturers.

At the time, the regulator responded most groups robustly managed their conflicts of interest, but used its latest report to express some concenrs over institutional ownership of financial planning dealer groups.