ASIC sheds light on vertical integration probe

Aleks Vickovich
— 1 minute read

The corporate regulator has released details on its surveillance of vertically integrated wealth managers, revealing it is on the lookout for mis-selling and advice failures.

In its submission to the Senate’s ‘scrutiny of financial advice’ inquiry, ASIC revealed that it has tasked two of its regulatory teams with a specific focus on vertically integrated businesses, having announced in late 2014 that it was ramping up its surveillance of the six largest financial planning licensees.

The Investment Managers and Superannuation team will be assessing conflicts of interest in these businesses and “how those conflicts are managed”, while the Financial Advice team will be examining cases of breach reporting, financial product “mis-selling” and quality of advice provided within these organisations.


The surveillance project is underway until June, with a subsequent report due to be released “shortly thereafter”, the submission explains. 

“The inherent conflict of interest created by vertical integration may not be readily apparent to clients, particularly if the product manufacturer and advice parts of the business operate under separate licences and business names,” the submission contends.

The slated register of financial advisers – which will include information about AFSL ownership and alignment “where applicable” – will help with any consumer confusion, the submission anticipates.

ASIC has also suggested that in addition to the adviser register and surveillance work, that a number of other measures may be useful in assisting consumers with their understanding of business models and conflicts of interest.

Specifically the submission suggests that advisers could be required to “provide a prominent, simple statement about the relationship of the adviser to the issuer, and the limited range of products that the adviser is able to recommend, before the advice is provided”, while also re-submitting the notion of a ‘restricted label’ for intermediaries aligned to financial product providers.

At a meeting of the Independent Financial Advisers Association of Australia in November 2014, ASIC senior executive leader of the Financial Advice team, Louise Macaulay, confirmed the regulator is conducting specific surveillance of the six largest financial advice companies in Australia.

However, Ms Macaulay “rejected the premise” of a question from the floor suggesting this was a new strategy for the regulator, arguing ASIC has always treated independent and institutional financial advice firms equally.


ASIC sheds light on vertical integration probe
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