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.”
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.”
