No evidence to back quality of independent advice says AMP

There is no evidence that ‘independent’ financial advice is of any greater quality than advice from other business models and 'independent' advisers account for the vast majority of cases where customers have unpaid Financial Ombudsman Service determinations, according to AMP Limited.

In a submission filed as part of the Productivity Commission (PC) Inquiry into Competition in the Financial System, AMP Limited has defended vertically integrated financial institutions including in the context of the delivery of financial advice.

The AMP submission said that with the Best Interests Duty introduced under the Future of Financial Advice (FOFA) legislation, vertically-integrated institutions were "working to ensure optimal consumer outcomes in a vertically integrated environment."

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In doing so, it cited the fact that AMP had between six and eight different insurance companies listed on each of the Approved Products Lists (APLs) for its different Advice Licensees.

"We believe that this flexibility in product choices enables our financial advisers to offer the right insurance policy for the right client, while acting in the client’s best interests," the submission said. "And, while AMP may be considered as a vertically integrated institution, the majority of the insurance that AMP’s financial advisers choose to recommend to their clients flows to non-AMP products."

The AMP submission also claimed that the significant capital strength contained within vertically-integrated financial instititutions meant they had the resources and brand strength to provide their advisers with high quality professional development, education and training.

"Very importantly, vertically integrated firms are also able to stand behind the advice their advisers give to customers, and facilitate remediation in the event that customers don’t receive advice that is in their best interests," it said. "There are no unpaid FOS determinations relating to a vertically integrated firm."

It said vertical integration also enabled "greater levels of customer access to advice compared with reliance on Independent Financial Advisers (IFA’s) alone", claiming that the "costs to financial advisers and Advice Licensees of providing quality financial advice are significant" and that a disaggregated industry (whether that disaggregation was achieved through separation of ownership or separation of operations) would be more expensive – "especially for advice, which may ultimately reduce the availability of advice."

Dealing with financial advice, the AMP submission finished on the following note: "There is also no evidence that ‘independent’ financial advice is of any greater quality than advice from other business models; indeed advice from ‘independents’ has proved to be the most damaging to consumers and was the driver of the original Ripoll Inquiry. Independents also represent the vast majority of cases where customers have unpaid FOS determinations."

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I agree with the sentiment. I am an "IFA" or EFA as it is probably to be known nowadays, have our own licence, not aligned to an institution, have close active professional working relationships with a decent number of accounting firms and solicitors dealing with client matters, and predominantly do fee work but due to technicalities we all know, can't call ourselves 'independent'. Another adviser down the road is hell bent on getting that designation, but when you compare the level and technicality of advice our firm offers versus his, the sentiment in this article rings loud and true. A title does nothing (like all these 'consultants' that pop up on facebook that used to be truck drivers or butchers a year ago), it is the knowledge, experience, ethics and application that counts.

Agree as well Joe. Couple of additions and caveats to my thoughts though. The additions are, I actually think the risks in some of the smaller boutiques have actually increased as they have vertically integrated themselves i.e. if their 'product' offering isn't so good, the adviser is commercially going to find it very difficult to move funds, especially as a shareholder. If your with say AMP, there would be fund management options away from AMP, though incentives may be too enticing as well. The caveat is the issue of what I think is called third line enforcement, this is the Platforms. These larger groups tend not to offer any choice of platform, and this is where the coralling starts. We also don't get disclosed how much fund managers pay for shelf space, and some managers won't, so you can't see the conflicts there. Different pricing structures on platforms that reduce platform fees IF you use internal product is another way of confusing advisers with respect their best interest duties. Oh, for a level playing field and this I imagine is what the Productivity commission would dream of.

Good points, agree Bozo.

I provide advice through a vertically integrated structure but have had the occasion to prepare advice documents for a couple of 'indepenant advisers'. I have been quite shocked at the lack of investigation and documentation (and technical knowledge) provided. My Licensee provides an APL with a broad range of product providers, and we can go outside of this APL if we can demonstrate that a non-APL product better suits our client's interests. Plus we have access to a well resourced and experienced research team together with a fantastic technical team. I fully agree that 'independant' does not mean 'better'.

I hope you have reported that Cheryl however I would assume not as I dont think its actually true. Really all these negative comments, why? I can understand AMP wanting to protect its ground, however the rest of you should be ashamed to so quickly stab fellow advisers in the back in public. Take note that to be independant you need to not take commission or product payments, only be paid from clients directly for your advice. I dare say a lot of you could not survive on that basis. As for this more breaches by independants, that is no way true, based on no proof, look at the AIOFP list of independant advisers, then come back and make those sort of comments. Stop throwing stones at eachother, we advisers are all in this together.

The aiofp didn't they as an organisation have a platform on which they took bonus overrides or volume overrides?

Bozo, if you want the actual information call the AIOFP, dont assume anything to try and put them in the same basket as the fum hungry instos like AMP. Point is, and Hang on makes this well, it seems not a lot of people actually know what independant is. AMP certiantly dont, and neither do some of the people making these comments, which is quite sad in a way. To be a truly independant adviser ( not take money from any product at all) is hard yakka, really hard work, this is why there arent many about. Yes ASIC and AMP need to start using the right language, non aligned is the description in terms of ownership of planning businesses, not independant, independant is only used when speaking of how you charge clients, ie independantly of product.

I have but it's not necessary. Just read some FSG's of members. It's a white label product and fees go back to them. I was really putting it out there so people could do there own homework if they were interested. My point though is not about them particularly. You say they can't be put in the same basket - well why not? Aren't they all doing it fum/fees/vertical? What's the diff? Unless they open up APL's for Platforms across all dealers and ban any form of remuneration from platforms, then advice will remain open to conflict. It's the biggest area of conflict, because the dealers use it to coral people - and then charge fund managers shelf fees and also use pricing that ensures there products are heavily favored.

To be independent goes further than just no conflicted remuneration. No ownership or licensing associations with product providers is also required. I expect you know this, but don't assume others do. And yes it is tougher, but rewarding, to be independent.

What a ridiculous comment. Good advice is good advice. In regards to commissions and/or product payments you realise that all licensees and independent adviser's now charge a fee for service for advice as it is illegal to accept commissions from product manufacturers since FoFA. Sought of makes you point quite irrelevant.

there are still many legacy platforms that can be used that involve commissions and volume bonuses. FOFA only drew a line in the sand on new arrangements. Have a look around.

AMP's use of "independent" and "independents" should read "non-aligned" or "not vertically integrated". It's disappointing, but not surprising, they don't know the difference.

Sorry Jason but ASIC made those statements particular "non-aligned" and "non-institutionally owned" and the like also illegal if receiving $1 of commission such as insurance commission or from older legacy products.

Breaking news Toyota concludes Motor Vehicles the only way to travel and also concludes there are no differences in arrival times when using a Bike compared to a Car. Let me see there are 18,000 advisers in Australia (a very small number because they all went broke trying to compete with AMP) and about 17,800 work for AMP. So 17,800 voices will shout me down and would also conclude that I Mr Adviser working for AMP are under absolutely no pressure to turn up to AMP school and wear a red shirt when we at AMP all wear blue shirts. No pressure at all. The closest thing to AMP and this thinking would be North Korea. I love our illustrious leader Mr Kim ill AMP and we are free citizens to choose. Back to AMP school for me but before I go I say, free advertising, discounted software, discounted research, discounted web site, subsidized wages costs, BOLR, discounted dealer group fees if i use AMP products. 5 pages in a FSG talking about bonuses and subsides this and that kick back providing i meet certain criteria. BOLR dosen't also influence advice I'm sure. Anyone who thinks an AMP adviser has freedom of choice has rocks in his head. Maybe AMP should tell their clients they are not actually clients they are not even customers they are referred to as "registers" meaning they are an asset to have the blood sucked out of their wallets for 5 years and then sold at 3 times to the next blood sucking AMP adviser.

I've read some of those FSG's - I suspect half the advisers don't even understand the incentives there are so many!

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