Planners question independence of advice
The Australian financial services industry is under stress from competing forces, with increased concentration of ownership working directly against the requirements for a greater focus on advisers’ fiduciary duties.
According to Andrew Hewison, director and private client adviser at Hewison & Associates, increased institutionalisation across the industry is influencing the sales process for many clients and causing concerns about the independence of the advice they receive.
“The larger institutions are right now seeing a huge opportunity to make a lot of money by gobbling up financial service practices, and that opportunity is all about selling or distributing product,” Hewison said.
“That model or mindset goes directly against non-commission-based selling advice.”
Ongoing merger talks involving AXA Asia Pacific, NAB and AMP are the latest chapter in the increased concentration of ownership in financial services across Australia. But smaller unaligned practices say they are receiving widespread support from clients concerned about the independence of the advice they receive.
“The clients we see, and are seeing in increasing numbers, are really concerned that the advice they’re getting isn’t independent and they lack confidence that what they’re being told isn’t unbiased,” Hewison said.
“How you unwind [commission-based selling] is an extremely difficult question to answer and getting more so given the increased concentration of ownership,” he added.
FIA Financial Planning principal Brett Handke said clients would always have legitimate questions to ask regarding the independence of advice being offered by institutionally owned organisations.
“[Institutionally owned practices] will always being influenced to sell products that are produced by the bank. I just can’t see how they will transition away from that while they remain owned by a bank,” Handke said.
But a spokesperson from AMP, the second largest planning group in the country, said there were many reasons clients would choose a larger brand over their smaller rivals — not the least of which was the security of the brand.
“Not only can we offer the security of the brand, which can provide great reassurance for client, but we can also offer the support of the entire company and the fact that, as a company, we will always stand behind the advice we give,” the spokesperson said.
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