The regulator’s review of Australia’s five largest financial advice providers has found alarming levels of in-house financial product recommendation by financial planners.
The review, which examined advice provided by a number of institutionally aligned licensees from 2015 to 2017, found that 68 per cent of all client funds across these businesses were invested in financial products owned and operated by related entities.
The examination comes despite the fact that 79 per cent of financial products across the reviewed licensees’ approved product lists were external, with just 21 per cent made up of in-house products.
While the behaviour differed across licensees, “in most cases there was a clear weighting in the products recommended by advisers towards in-house products”.
Moreover, a review of sample files where advice to switch products to an in-house product was provided found that in 75 per cent of cases, the FOFA best interest duty was not complied with.
ASIC will now “consult with the financial advice industry” on a proposal to “introduce more transparent public reporting on approved product lists, including where client funds are invested, for advice licensees that are part of a vertically integrated business”, a statement from the regulator said.
The licensees reviewed in this investigation were AMP Financial Planning, Charter Financial Planning (AMP), millennium3 (ANZ and soon to be IOOF), ANZ Financial Planning, Commonwealth Financial Planning (CBA) and Count Financial (CBA), GWM Adviser Services (NAB), NAB Financial Planning, Securitor (Westpac) and Westpac Financial Planning.
However, ASIC deputy chair Peter Kell said that any remedy would likely involve licensees beyond those mentioned.
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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