Independent advice networks now have little control over their future and must hope the Australian Securities and Investments Commission (ASIC) can protect them from “discriminatory actions” against independents.
This is the view of Peter Johnston, executive director of the Association of Independently Owned Financial Planners (AIOFP), who claims advisers are being made scapegoats for a litany of ills within the industry.
“There seems little doubt that the minister and his political allies are trying to link the $29 billion of frozen or failed products since 2005 to the independent advice networks to justify their thinly veiled discriminatory actions against the independent sector,” he told Professional Planner Online.
“Over the past 30 years the advisers have always been politically blamed by the media for product failure purely because the client’s only recourse is against the adviser [for giving the advice]. They cannot pursue the many gatekeepers who flee for cover and are ultimately responsible for the failure.”
To highlight his point, Johnston asks if a butcher would intentionally sell rancid meat to his customers. The obvious answer is no, as customers would not return and the business would be finished.
Assuming there was no obvious odour or visual blemish of the meat, the butcher would then approach his supplier to ask some very serious questions.
“This is precisely the same position all advisers are in when product failure occurs but it seems some think advisers would purposely sell rancid products,” argues Johnston.
“We agree that product commissions should be banned, but just because a product paid a commission, does not mean the product would fail?
“Of course it does not. Over the past 30 years commissions have been a legal and acceptable mode of payment for all products.
PJC to expose gatekeepers
“The highly anticipated Parliamentary Joint Committee enquiry into the Trio fiasco is going to highlight a few home truths about the conduct and structure of our industry gatekeepers – regulators, research houses, custodians, auditors, trustees and directors.”
In this respect, Johnston claims advisers are often as much the victims of the process as those they advise.
“Advisers are in the same boat as their clients,” he says. “We rely upon other third parties to do their job efficiently and fairly, yet advisers ultimately have to make a decision. But we have no choice but to rely upon the information that is put in front of us from the gatekeepers.
“It is literally impossible for advisers who sit in their offices around the nation contending with the day-to-day duties of seeing clients, massive compliance expectations and operating a business to personally visit and inspect every detail of every product scattered around the nation and the world.
“That’s why we have the highly paid gatekeepers in position to take some responsibility for their actions. Having massive resources like the banks is no guarantee of avoiding product failure or compensation for clients – the market is littered with clients litigating against the banks for poor advice.”
Johnston concludes that independents now have no choice but to rely upon a fair-minded ASIC to make the right decisions on what really is conflicted remuneration and what’s in the best interests of the consumer.
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