Independent financial advisers have welcomed the Australian Securities and Investments Commissions (ASIC) crackdown on the use of the word “independent”.
The regulator has corrected claims made by insurance brokers and financial planners about the independence of their services.
In a recent surveillance project, ASIC found 21 instances of insurance brokers and financial planners making statements about the independence of the licensee or the services they provide in breach of the Corporations Act.
The relevant financial services licensees have now voluntarily complied with ASIC’s request to remove or amend the statement in each of the 21 instances.
However, independent financial adviser Matthew Ross told PPO that this should be seen as the tip of the iceberg.
“We applaud that ASIC doing this but call on the government to beef up the funding of ASIC so that it can conduct surveillance activities more regularly,” he said.
“ASIC is a watchdog for consumers and in this case a watchdog for us because they’re protecting a valuable term which is being abused. However the lack of funding means the watchdog has little in the way of teeth.
“We’d also like to see more funding provided by the government to help more financial advice firms make the transition to operating in an independent manner.
“Many people think providing advice on an independent basis is impossible, but we’re proof it’s possible.”
Zero tolerance
ASIC Commissioner Peter Kell said ASIC would not tolerate consumers being mislead on the important issue of the independence of financial system gatekeepers such as financial advisers and insurance brokers.
“ASIC conducted the survey following a single complaint in order to assess the extent of the problem of inappropriate usage of the term ‘independent’,” he added.
‘This action puts the broad financial services industry clearly on notice about ASIC’s expectations. Going forward, where we find incorrect information about independence we will be taking stronger action including publicly naming the licensees involved.”
AFS licensees are prohibited from using the terms, ‘independent’, ‘unbiased’ or ‘impartial’ if they receive commission or volume-based payments.
The licensees identified included 17 general insurance brokers, three financial planners and one life broker. In one instance, the statement was found on the website of an authorised representative.
AFS licensees must ensure that statements made by representatives in any published material comply with the relevant provisions of the Corporations Act.
Rob Ferguson of the privately owned Ferguson Betts Financial Planners and Life Brokers said in many cases, potential clients will check an adviser’s website to assess their suitability.
“I would like to see more focus on those authorised representatives who use a business name other than their licensees but fail to disclose the licensee name prominently on their website,” he said.
“Congratulations to ASIC though. This may be the encouragement needed for more advisers to think about taking out their own licence.
“At present it is a lot of risk and expense to ultimately look no different to a bank-owned planner in the eyes of a very confused public.”
How many bank owned AFSL’s clearly (so the public has no chance of being confused) show they are owned by a bank? Zero and ASIC do nothing about this. That is one of the biggest jokes in the financial planning industry that has not been addressed by FOFA at all.
A good start would be to go back to the pre 2005 regime where advisers had to have the name of the organisation they are licensed to displayed on all business cards in prominent writing to leave no doubt in the consumers mind of who they are dealing with. This requirement mysteriously disappeared around the federal election time.
ASIC does not believe that any advisor can be independent. They have basicaly “banned” the word independent.
Peter, I have clients that work for the ASIC.
Other members of the IFAAA (www.ifaaa.com.au) who also have “independent” painted all over their website, office and letterhead have been invited to sit on panels in the ASIC offices.
In short Peter, you’re wrong.