Independents facing criteria problem
While hundreds of Australian financial planners have marketed themselves as being ‘independent’, only a handful actually fulfils the AustralianSecurities and InvestmentsCommission (ASIC) criteria.
Research undertaken by one of the principals of Brisbane-based FSI Consulting, Brett Walker, over the past two years suggests that as few as 10 advisers operating in Australia actually fulfil the ASIC criteria.
Walker makes no bones about the fact that his research was undertaken with a view to garnering business for FSI Consulting’s http://www.independent-advice.com.au website, but he said he found the results fascinating.
“Since mid 2005 I have been progressively contacting all AFSLs [Australian Financial Services licensees] not institutionally owned or controlled (approximately 600 AFSLs in all) and asking them to confirm if they meet the ASIC test of independence as introduced under FSR [Financial Services Reform] in 2002,” he said.
“To date, I have uncovered fewer than 10 advisers who are ‘independent’ (as defined in section 923A) out of an adviser population of about 15,000, 20 per cent of which (approximately 3,000) are apparently not linked to an AFSL that is owned or controlled by an institution,” Walker said.
According to the ASIC website, the law states that financial advisers can only call themselves ‘independent’, ‘unbiased’ or ‘impartial’ if they (and their associates) do not receive any of the following:
> commissions (apart from commissions that are rebated in full to the person’s clients);
> forms of remuneration calculated on the basis of the volume of business placed by the person with an issuer of a financial product; and
> other gifts or benefits from an issuer of a financial product that may reasonably be expected to influence the person.
The website cautions that the regulator’s view on rebating is also quite restrictive, stating: “ASIC considers that the requirement that commissions are ‘rebated in full’ is satisfied if, as soon as the commission is received, it is rebated to the client without delay by:
> rebating an amount equivalent to the commission directly to the client by cash, cheque or other direct means (e.g, by direct credit to a bank account nominated by the client); or
> offsetting any debt owed by the client (i.e, a debt owed before the commission was received by the licensee) by an amount equivalent to the commission, except in circumstances where the amount of the debt is calculated by reference to commissions expected to be received by the licensee.
Walker said that there were many planners who were fee-for-service but who for one reason or another could not use the term ‘independent’ to promote themselves because of factors such as their receipt of legacy trails or getting paid via a product, such as a wrap.
AUTHOR
Mike Taylor
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