Before the corporate regulator can ramp up surveillance of vertically integrated organisations it must first set clear parameters, the Financial Planning Association has suggested.
Addressing journalists in Sydney yesterday, FPA chief executive Mark Rantall said a number of unanswered questions remain regarding the corporate regulator’s announced probe into vertically integrated wealth management.
“The starting point needs to be ‘What is vertical integration?’ and subsequently ‘Is vertical integration a bad thing?’ And arguably it’s not,” Mr Rantall said, adding that there are a range of businesses that could potentially be considered reflective of this model including superannuation funds.
FPA general manager, policy and conduct, Dante De Gori concurred that there are “so many forms of vertical integration” and said the FPA is unclear as to the scope of ASIC’s investigation.
However, regardless of the regulator’s investigative plans, Mr Rantall said there are a number of organisational principles these organisations should heed.
“The first thing right across the board is the right cultural setting – ensuring there is a culture of independence of advice and ensuring advice is provided in the clients’ best interests,” he said.
“The second thing is support – both financially and in terms of encouragement – of education and training; ethical training especially is critically important.
“The third thing is to get the structure right as reflected in our policy of separating product and advice (SOPA).”
Mr Rantall said organisations should be placing different reporting obligations on affiliates or employees performing product sales and professional advice functions.
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