Liberal Party MP Jason Falinski and ASIC Commissioner Danielle Press

The corporate regulator has been forced to explain the different independence disclosure obligations between asset consultants and financial advisers in a series of questions taken on notice by Commissioner Danielle Press at the Parliamentary Joint Committee on Corporations and Financial Services in November.

Liberal Party MP Jason Falinski hounded Press on the marketing of asset consultant Frontier Advisors, who provide investment advice to institutional clients like superannuation funds and insurers, as well as private wealth advisers.

“ASIC have rightfully made a lot of the term ‘independent’,” Falinski said.

After pointing out that advisers working for vertically integrated institutions like AMP, CBA and Westpac “can’t call themselves independent”, Falinski turned his attention to Frontier, who he said were “putting themselves out there as financial advisers and are calling themselves Australia’s leading independent financial advisers”.

After Press clarified that Frontier is a business that provides institutional advice, not retail, Falinski clarified that his real issue was with the group’s board of directors, which includes representatives and directors from HESTA, Cbus, AustralianSuper, First State Super and Aware Super.

“Is that sounding like an independent group of directors?” Falinski said.

Press pointed out that Frontier’s board is comprised of ownership representatives along with an independent director and an independent chair, then chose to take on notice whether Frontier “falls foul” of the independence requirements.

In its subsequent response, ASIC explained to the PJC that Frontier can use the restricted term ‘independent’ as long as they don’t receive commissions, volume-based remuneration, or other “gits or benefits from product issuers”.

Front of mind

The topic of independence disclosure is clearly on the minds of policymakers.

In response to a Hayne Royal Commission recommendation, last week the Assistant Minister for Financial Services, Jane Hume, presented a Bill that requires financial advisers who would contravene the Corporations Act by calling themselves independent to give retail clients a written statement “in the form described by ASIC” disclosing their lack of independence.

The change will require firms that accept commissions for insurance advice to disclose the fact to clients upfront, a move which may force some to reassess whether commissions-based insurance advice is worth retaining in their business.

It’s unclear yet who else will need to provide the disclosure, with some industry stakeholders estimating that the combination of managed accounts, insurance commissions and asset-based remuneration will affect 99 per cent of advisers.

Commonly understood