Most advisers to declare 'not independent'

Only 2% of advisers and advice firms are ‘independent’ under section923A of the Corporations Act, meaning most financial advisers are subject to the new Financial Services Guides (FSG) disclosure obligations that will commence on 1 July, 2021.

An analysis by The Fold Legal said only advisers/firms that satisfied a list of strict criteria were free to name themselves as “independent”, “impartial”, and “unbiased”, and everyone categorised as “not independent” were subject to the new obligations.

However, advisers could qualify as “independent” if they or their Australian financial services licensee (AFSL) and all authorised representatives:

  • Did not receive insurance commissions (or rebate them back to clients in full);
  • Did not receive any gifts or benefits from product providers;
  • Had no restrictions regarding the products you can recommend; and
  • Did not own, are not owned by, and did not have any interest or association with any product providers.
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“If you don’t qualify as independent, you must specifically disclose that you are not independent, impartial or unbiased and explain why. There are also requirements about how this disclosure must be displayed in the FSG,” it said.

“In terms of explaining why you are not independent, impartial or unbiased, the Australian Securities and Investments Commission [ASIC] has chosen not to issue any prescribed wording as it considers that advice firms are best placed to describe their business model to their clients.

“This means there is flexibility to develop a statement that reflects your firm’s circumstances and will be easily understood by your clients.”

From 1 July, 2021, the key changes to the obligations were:

  • FSGs must include written disclosure that you are not “independent, impartial or unbiased” (assuming you are not independent within the meaning of section 923A of the Corporations Act);
  • FDSs must include forward-looking disclosure as well as the current backward-looking disclosure; and
  • All Ongoing Fee Arrangements must be renewed by the client each year (including pre-1 July, 2013, arrangements).

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Bloody O’Dwyer and Frydenberg giving Real Advisers with our own AFSLs the most restrictive definition of Independent Advisers in the world.
Add that to the list of LNP Adviser disasters.
Along with:
Annual FDS Optin at Admin platform level,
ASIC Adviser Levy,
Extra CPD to 40 hrs pa,
Life Insurance premiums up 100% in 3 yrs,
PI premiums up 50% in 3 yrs,
Cant wait for Compo of Last resort too.
Stuff you LNP, Frydenberg, Hume, ODwyer, I am totally done with voting for you lot.

So now the law forces us to lie to our clients! What a farce.

"Sorry Mr and Mrs client. I know you pay a set dollar fee and there are no commissions or volume bonuses, and I am legally banned from any conflicts of interest due to FASEA. But because I service a small number of clients who choose to pay for my advice via commission, it means my advice to you is NOT independent"

Kenneth Hayne and Jane Hume should apply for a gig in the next series of Rob Sitch's Utopia.

It’s a joke - but one which will right itself soon as insurance premiums continue to rise. My BT IP renewal just came in with a 75% increase. Insurance and comms will go, then we will all be independent and can pay copious sums to google to get us all
At the top of the list for the “independent adviser search” in our own towns, then we can nominate ourselves for self onanism awards which we will slap on our websites to impress clients who will walk in and give zero shits about an FSG! Cool legislation guys. Can’t help but feel Tupicoffs FPA influence on that one!

There seems to be six simultaneous issues working against insurance advice:
- LIF reducing revenue and increasing clawback risk
- An ASIC persecution agenda that regards switching products for client benefit as "churn"
- An ALP/Choice agenda to ban insurance commissions altogether
- Massive premium increases across the board that clients partly blame advisers for as they recommended the product
- Specialist insurance advisers likely to exit the industry due to not meeting FASEA education requirements
- A farcical legal definition of "independence" that prevents independent advisers calling themselves such if they give clients the choice of paying for insurance assistance via commissions.

Some advisers are giving up insurance advice already due to the impact of one or two of these issues. But as the combined impact of all six progressively takes over I wonder if insurance advice will even exist by 2026.

It is fair to say the average adviser is more independent than the majority of politicians and public servants that lord their Orwellian dictates over them.

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