The Productivity Commission has released its final report on competition in the financial system, with a raft of recommendations for the advice industry.
The report has called for an overhaul of the way APLs are presented to consumers.
Specifically, AFSLs should be required to disclose the number of products on their APL as well as the proportion of in-house products on it.
Every AFSL should be required to disclose the proportion of recommended in-house products that are on the APL as well as the proportion of off-APL products that are recommended.
The Productivity Commission has also recommended that general advice be renamed, saying that it is currently up to consumers to know ‘intuitively’ that it is “like marketing”.
“General advice, as defined in the Corporations Act 2001 (Cth), is a misleading term and should be renamed,” said the report.
“Any replacement must ensure that the term ‘advice’ can only be used in association with ‘personal advice’ – that is, advice that takes into consideration personal circumstances.”
The new term should be tested with consumers and in place by “mid-2020”, the report recommended.
The report also recommends the creation of a new class of licence that would allow advisers to advise on home loans.
“ASIC should assess the feasibility of financial advisers providing advice on home loans and other credit products, via a new AFSL that would not require a separate Australian Credit Licence to be obtained,” the report said.
“This assessment should examine the costs and benefits of a new licence, the consequences of various remuneration models and the applicability of a principal integrity officer.”
You can read the entire Productivity Commission report here and a shorter overview here.
Interestingly the PC have made the recommendation to remove trail comms for mortgage brokers. I guess they assume Planners will pick up the slack for nothing.
Love it… will it also apply to industry fund network ?
RI Advice
Owned by IOOF
Pleasing to see the Productivity Commission adopting the FPA’s submission on General Advice. This will help differentiate professional advice from product sales for consumers.
The list should not only include in-house products & platforms, it should also include all products, platforms and managed funds where the Dealergroup and/or its parent company receives any form of income (or benefit) to itself or any subsidiaries. All such conflicts should be disclosed & transparent to all advisers and clients..
Agree
Also should say upfront the dealer gets a commission kickback from the external Insurance provider , not hidden up the back in an FSG .
Wow some sensible regulation it seems.
And why not make all the hidden bank / insurance owned advisers clearly disclose who their parent entity is.
Why allow so many bank and insurance co owned AFSL’s to masquerade behind the various Dealer Group names that appear independent.
eg.
Hillross – owned by AMP
Financial Wisdom – Owned by CBA,
RI Advice – owned by ANZ, etc
[b]True, clear, front and centre labelling and disclosure of Bank and Insurance Company ownership of their AFLS’s / Dealer groups is a must !!!!!!!!! [/b]
The ASIC register already quite clearly promotes ultimate ownership of licensees, so to does the popular “adviser ratings” website (drawing from ASIC) and they even include logos so people can’t even read or don’t want to read the fine print are well informed.
FSGs also disclose this information, as well as other potential conflicts etc etc. What more would you suggest? Flaming crosses outside the offices of these practices?
‘True Adviser Owner’ – Remember that typically very few bank/insurer licensees have financial interests in the practices and aren’t ‘owners’ and despite what you might think the principals of these practices are the ones who decide how to operate and under which licence. This is why the licensees compete for advisers. Unlike some other advice channels (industry fund advice) where advisers don’t have a choice as to how they provide advice, and they don’t own any business.
Bank / Insurance company owner AFSL logo’s should be on front pages SoA’s, front page websites, letterheads, cards, email signatures, etc and all advertising so consumers can easily see who the parent owner is.
I guess the banks and insurance companies didn’t lobby government very hard to get rid of clear AFSL ownership disclosure back in 2005, so they can ultimately hide the ownership.
Yeh sure and the banks / insurance companies don’t hold multiple various AFSL’s that they own to distribute their products in non bank / insurance company names ? Never
Well said . . . it continues to boggle my mind why this hasn’t been the case for at LEAST a decade now. Seems like non-rocket science, common sense and one of the very simplest ways to help protect consumers. ASIC asleep at the wheel again . . . too harsh? Well it is their job to protect consumers and they couldn’t even implement something this basic. Credibility of ASIC . . . you be the judge!
Not to mention the tiny, small, incy wincy logo of AMP firms on page 200 of their free white labled websites
You are mistaking owner of licensee with owner of advice practice. All of these disclosures are in FSG, on websites, adviser ratings etc- Hardly hidden and sometimes promoted. Just because the licensee they choose to license with is owned by a product manufacturer, does not make them a shareholder/parent entity of the adviser. These advisers and advice practices are rarely owned by the parent company of the license holder. Also, as we have seen, being “independent” does not instantly lead to a better client outcome.