Sole commission payments not best practice: ASIC
By Sara Rich
The Australian Securitiesand Investments Commission (ASIC) has recommended that financial planners avoid being paid solely by commissions as a matter of best practice.
But although ASIC said it believes scenarios where advisers are paid just by commissions “should be avoided”, it said the inherent conflict of interest could be managed by the licensee implementing additional incentive structures that rewarded advisers for providing quality, compliant and consumer-focused advice, or by making “full and frank” disclosure to their clients about how they were paid.
The recommendation appeared in an ASIC discussion paper released last week that used hypothetical case studies to illustrate conflict of interest issues across the financial services industry and provided the regulator’s views on how to manage them.
The paper also outlined some conflict of interest scenarios that ASIC claims are so serious that they cannot be managed and therefore must be avoided, such as product providers paying fees to get their managed funds on planner’s approved product lists.
An ASIC spokesperson said licensees not following the paper’s guidelines would not yet be the subject of ASIC enforcement action.
“We haven’t gone that far yet. This is more of a discussion paper,” the spokesperson said.
The paper aims to educate advisers, licensees, research report providers, product issuers and fund managers and ASIC is accepting submissions up until Friday, June 9.
A Financial Planning Association spokesperson said overall the association was happy with the paper but would be seeking clarification on some parts of it.
Following the consultation period, the case studies will most likely be incorporated in ASIC Policy Statement 181 — Managing Conflicts of Interest.
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