Reflecting on calls from the Association of Independently Owned Financial Professionals (AIOFP) and the Boutique Financial Planning Principals Group (BFP) to introduce more explicit disclosure of the ownership structures of financial planning firms, assistant treasurer Arthur Sinodinos told InvestorDaily such a move is “sensible” and would not be ruled out by the Abbott government’s self-imposed financial services moratorium.
“The idea that a service provider would have to disclose who they are owned by, whether it is a big bank or someone else, I don’t see a problem with that idea,” Mr Sinodinos said. “I’m not sure why they would have changed that, we will pursue that; we think that’s a sensible thing – anything that improves transparency, improves information to the consumer, [the government is] for that.”
Considering there is already a requirement in place – as dictated by ASIC’s guidance on managing conflicts of interest under the Corporations Act – to disclose the owner of the relevant Australian financial services licence (AFSL) in financial services guides and other contractual documents between financial planners and clients, introducing additional requirements to make that relationship clearer to consumers would not constitute “red tape” and would therefore not be ruled out by the government’s deregulation agenda, the senator said.
Mr Sinodinos’ comments follow a Roy Morgan Research survey of 3,000 financial planning clients – the results of which were released in August – which found many consumers of financial planning services are confused about the ultimate owners of the financial planning firm with whom they have a contract, particularly where parent company branding is not utilised.
“With a large proportion of advisers being owned by fund managers, the need for clients to understand the extent to which their adviser is independent will become critical and should not be confused by branding,” said Roy Morgan spokesperson Norman Morris, commenting on the findings.
The Roy Morgan findings proved there is an issue that needs to be resolved, BFP president Wayne Roggero told InvestorDaily in welcoming the senator’s comments yesterday.
“We fully support the comments, we have been very vocal on this,” Mr Roggero said. “[Ownership disclosure] is already planted on page 25 of a financial services guide or in [a statement of advice] but it needs to be more obvious.”
Mr Roggero proposed re-introducing the standards applied prior to the Financial Services Reform Act (FSR) legislation in 2001, whereby licensee ownership information was required to be “equivalent in size” to the business name on marketing materials, business cards and anywhere official branding appeared.
While the BFP would welcome the additional disclosure requirements indicated by the senator, it would also like to see a national conversation about going “one step further” along with the consideration of UK-style distinctions between “independent” and “restricted” financial advisers, Mr Roggero said.
At the BFP national conference in Brisbane in September, ASIC senior manager, financial advisers, Trevor Clarke indicated the corporate regulator is “absolutely aware” of consumer confusion over ownership of financial planning firms.
“It does exist as an issue, clearly – the question is whether it's a misleading disclosure issue,” he said.
