Powered by MOMENTUM MEDIA

In-house product advice a ‘third way’

Tim Stewart
— 1 minute read

ASIC should consider replicating the UK's ‘restricted’ regulatory model in order to make financial advice affordable for more Australians, argues NMG Consulting.

In his latest Trialogue note, NMG Consulting partner Oliver Hesketh made the case for financial advice that is exclusively tied to in-house product.

The 'tied' advice regulatory model, which operates in the UK as 'restricted' advice, involves a "very clear understanding between the customer and the adviser that only in-house product will be offered", Mr Hesketh said.

Advertisement
Advertisement

At present, holistic advice is prohibitively expensive for the vast majority of Australians unless it subsidised by a vertically integrated business model, he said.

"If vertically integrated advice models can no longer be tolerated, or the cost of regulation renders it unfeasible, that means around 900 thousand Australians would be left without any financial advice at all," Mr Hesketh said.

Intra-fund advice, on the other hand, is of limited value to super fund members, he said (it doesn't even allow the adviser to consider the superannuation balance of their spouse).

The solution could be to adopt a similar 'tied' regulatory model as the UK, which would "allow industry funds to offer a valuable, lower-cost proposition to more members than they can realistically target today", Mr Hesketh said.

"It’s difficult to believe the regulator might entertain a tied advice regime right now, but in our view at least, consumers would be well-served by a third regulatory framework for financial advice that recognises the cost of maintaining true independence in advice may be more than the average Australian is prepared to pay," he said.

Mr Hesketh will be speaking at the 18th Annual Wraps, Platforms and Masterfunds Conference on 1-3 August in Crowne Plaza Hunter Valley.

 

 

In-house product advice a ‘third way’
Magnifying glass
ID logo

related articles

  • ‘We have a long battle ahead’: Byres

    APRA chairman Wayne Byres has told banks to prepare for the long haul and warned that the idea that the financial system will return to norm...

  • Stimulus must stay: Lowe

    RBA governor Philip Lowe has warned that withdrawing the massive fiscal stimulus risks destabilising the recovery at a critical point. ...

  • Court orders receivers to WA firm 

    The Federal Court of Australia has sided with ASIC over a case concerning an alleged unregistered managed investment scheme and a related co...

promoted stories

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.