Institutional dominance more compromising than commissions

The dominance of financial planning by large financial institutions represents a greater conflict of interest than commission-based remuneration, according to a submission to the Cooper Review on superannuation by a Sydney financial planner.

The planner, Healthy Financial principal Richard Cosier, used his submission to support the broad concept of a national default superannuation fund. But he questioned who was really adding value in the superannuation value chain, and suggested that the Australian Securities and Investments Commission (ASIC) added no value whatever for the vast majority of members — yet added dramatically to the cost of super funds.

“For the vast majority of members, ASIC adds no value whatever, yet adds dramatically to the cost of super funds because its policies (or the threat of them) cause every other group in the chain to go overboard in an attempt to reduce the risks of non-compliance,” Cosier’s submission stated.

He said that on the basis of the Westpoint and Storm experience, ASIC would appear to have failed in its objective to protect members and investors from unscrupulous product sellers and their distribution network.

Cosier said the other major question mark in the value chain was the role of the licensee — with the licensee/adviser relationship being completely misunderstood by most people.

“In fact these two groups have quite different basic objectives, and are often unwilling partners,” his submission stated. “Advisers are in the advice and planning business, and the licensee is in the compliance and distribution business.”

Cosier said that much had been said about financial advisers having a conflict of interest because they were paid by commission but, in fact, the biggest conflict of interest arose from the fact that 80 per cent of licensees were owned by large financial institutions.

He said that it was in these circumstances that a distinction needed to be drawn between planners working for companies linked to the major institutions and those who were bona fide independent licensees.