FOFA not designed to address vertical integration

The Future of Financial Advice (FOFA) reforms were never intended to address vertical integration and this is something that needs to be addressed separately, according to the Financial Planning Association (FPA).

The FPA head of policy and government relations, Ben Marshan said FOFA was designed to ensure that irrespective of how an individual planner was licensed, the interests of the consumer would be prioritised over anything else.

“On the whole, what it’s done is it created an advice process where clients’ interests are put first before the planners, it’s created an advice process where the planner has a legal obligation to make sure they really understand the clients and provide them with strategies and solutions that will improve their financial position,” Marshan said.

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“What I would say is that vertical integration is a totally separate issue that probably needs to be looked at and dealt with.”

The Australian Securities and Investments Commission’s (ASIC’s) deputy chair, Peter Kell discussed vertical integration in the context of the Productivity Commission (PC) inquiry and said while FOFA had helped raise standards and remove remuneration conflicts, ASIC’s initial assessment of vertical integration in financial advice revealed most customer funds for vertically integrated institutions were still invested in related-party products.

Marshan said there was a broad spectrum in the quality of advice given to consumers at both ends in both independent advice practices and vertically integrated businesses.

Financial planners within vertically integrated businesses had developed products that delivered “phenomenal” outcomes, while there were instances where even independent advice businesses had delivered poor quality advice, and vice versa.“There’s a spectrum at both ends and I think, does vertical integration need to be looked at? Absolutely. But is that what FOFA was designed to do? No,” Marshan said.

He added that some of the bad news stories of poor conduct by advisers were example of pre-FOFA behaviour and consumer outcomes, and this would gradually decrease as the industry began to witness the effects of FOFA reforms.

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"some of the bad news stories of poor conduct by advisers were example of pre-FOFA behaviour" - sadly, there is still poor conduct happening in vertically integrated businesses post FOFA. But that's an inconvenient truth for an organisation who relies on membership dues from, amongst others, those same businesses.

Spot on exey, so sick and tired of the FPA and others supporting the instos and vertical integration, and even having the gaul to have a go at the independants

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