Standing in the glass house
By
Julia Newbould
Mon 16 Jul 2007
We all seem to live in glass houses when it comes to financial services conflicts of interest.
People in glass houses shouldn't throw stones, so the saying goes, but we all seem to live in glass houses when it comes to financial services conflicts of interest. There are dealer groups that are independent of product provision but make money through platforms; there are advisers who receive commissions indirectly through bonus discounts taken in the form of things such as overseas conferences; and there are product manufacturers that run dealer groups at a loss and must make this up in other ways. Conflicts are bound to occur.
Whether it is up to a government-appointed regulator, industry body or independent assessor to resolve the situation is something the industry has not really come to terms with. Thus, the conflicts remain. This week Madeleine Collins looks at one of the worst-case scenarios of conflicts of interest affecting investors, and how ethics and disclosure are not only in the eyes of the beholder but are also the focus of the FPA. At the launch of the FPA's conflicts of interest principles, the FPA frowned upon alternative remuneration (soft dollar) arrangements, buyer of last resort and the favouring of one product or platform over another, with all principal members required to adhere to the code.
The Investment and Financial Services Association (IFSA) is also looking at disclosure in financial planning and while ASIC recently attempted to split product sales and financial advice in the industry, IFSA was firmly against it. One reason was that the solution was too difficult to carry out. The Government has backed down on the proposal but is still pushing for acceptance of some form of the sales/advice split.
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