Financial advice licensees are being prevented from ditching restrictive approved product lists due to prohibitive research costs, according to several dealer group bosses.
Speaking on a panel at the 17th annual Wraps, Platforms and Masterfunds conference in the Hunter Valley, AMP Advice general manager Eric Gibson said there are real logistical and commercial reasons why APLs can not be entirely open-ended.
“I think at the end of the day our goal is to have a broad-based APL on all of our licences, we have a research framework to assess products,” Mr Gibson said. “I don’t think we’re going to get to one where every single product in the universe is on one APL at this stage. There’s a cost involved in that, in terms of managing that, maintaining your research and staying on top of it.
“We’re trying to have some flexibility in the system to meet that demand but … to have every one of them on your APL and to try and keep your research up to date and to keep monitoring and managing it is pretty significant.”
Kerry Thomas, head of advice at Fortnum Financial Group, concurred with Mr Gibson that risk and governance issues can override the need for openness when assessing aligned advisers' product recommendations.
“For us as well, as a smaller licensee it’s exactly that same principle in relation to governance and certainly when most of your research is coming to you from an outsourced provider, so that’s an additional cost and consideration that we need to make,” Ms Thomas said.
“We don’t necessarily have agreements in place with every single provider in the market, so when an adviser does make an application for something to go on the APL, that’s something we have to consider.”
At the same time, Ms Thomas said licensees need to “stay close” to their advisers and make sure that they are removing any impediments to acting in the best interests of clients.
Shartru chief executive Rob Coyte said that while open APLs for insurance may be more feasible, investment products need to be heavily scrutinised by licensees.
“There’s a lot of risk tied up in actually running a broad, open APL, and as a licensee it’s our responsibility not just to put things on the APL, but to actually monitor what these guys are doing,” he said. “We just in the last year found a couple of high-profile fund managers that were basically cheating, and we called them out and we worked with the research bodies and they agreed with us.”
Many advisers are not skilled at running portfolios alone, making broad APLs problematic, Mr Coyte added.
ClearView’s Chris Blaxland-Walker said that while there are risks and a need to apply a robust investment knowledge to APL assembly, often the lists are used to ensure that “house product always has to get put through”.
He said that limited APLs for insurance “limits an adviser’s ability to make informed decisions” and are “actually wrong”.
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