A former government investigator has warned that most financial planners who call themselves independent are breaching the Corporations Act.
Industry consultant Brett Walker, a former investigator with the Australian Securities Commission (now ASIC) has given names of licensees to the regulator that he believes are in breach of using the term independent.
“There definitely is evidence of that because people recognise the value of having independence,” he said.
Walker has been in contact with around 600 licensees to ask them if they were able to claim independence and if not, why not.
He said two years of research found that less than 10 non-aligned planners out of a total of 3000 would pass the corporate regulator’s measure of independence.
“About one in five financial advisers are neither owned nor controlled by an institution yet almost none are permitted to call themselves independent, unbiased or impartial,” he said.
Walker, who runs financial services company FSI Consulting, said 99 per cent of non-aligned planners would love to call themselves independent but are stymied by regulation.
The Corporations Act strictly regulates the terms independent, unbiased or impartial when it comes to giving financial advice.
ASIC bans the use of the term when a license receives commissions and does not immediately rebate them in full to clients, or when a licensee receives legacy trails or is remunerated from an investment platform.
“ASIC’s interpretation of independent is impractical and unworkable -and in effect, outlaws the use of the term independent,” Brisbane-based financial planner Bruce Baker said. “This is bad for consumers.”
Walker has started a website, www.independent-advice.com.au to help consumers find advisers that are not aligned to a product issuer like a bank, insurance company or a fund manager and who offer fee-for-service advice.
It has taken since March 2006 to get sufficient advisers onboard to justify opening the list to the public. Fifty-three advisers are listed.
Many clients mistakenly think their planner is ‘independent’ and not tied to the distribution channel of a bank, Roy Morgan research published in July found.
