Clients don't understand independence

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Roy Morgan has discovered how unaware clients are of their planner’s ‘independent’ status.

According to the organisation’s latest single source survey, clients find independence confusing, particularly when the planner is branded differently to the major fund manager that owns the planning group.

For example, 51% of the clients using Financial Wisdom (owned by the Commonwealth Bank) consider it to be independent, which is well ahead of the 21% who consider Commonwealth Bank branded planners to be independent.

This was the same across all the major banks. Almost half (48%) of clients perceive NAB’s Godfrey Pembroke to be independent, RetireInvest (owned by ANZ) was considered independent by 37% of clients, and Westpac’s St George was perceived as independent by 23% of clients.

 Planners labelled as belonging to the major banks were generally understood to be aligned, with only 7% believing Westpac planners were independent, 13% for ANZ, 15% for NAB and 21% for Commonwealth Bank.

Roy Morgan industry communications director Norman Morris said that the retail funds management sector will increasingly rely on their adviser network to retain customers, while acting in the best interests of their client.

“With a large proportion of advisers being owned by fund managers the need for clients to understand the extent to which their adviser is independent will become critical and should not be confused by branding,” said Morris.

“The Roy Morgan Research ‘Image of Professions Survey, 2013’, conducted in April showed that only 25% of the population rated financial planners as either ‘very high’ or ‘high’ for ethics and honesty. There is still some way to go in explaining the lack of trust that currently exists towards the profession.”

  • James Smith on 6/08/2013 9:53:40 AM

    The point I made is that industry and large retail super funds have their place and also have their limitations. We do not hear enough about their limitations and the advice/service gap filled by advisers. Similarly recommending individually tailored portfolios has its place with the value dependant on the quality of research. It would be more helpful to review the APLs and consider what investments,if any, are excluded. Similarly, it would be helpful to understand what research is available to support the investments not on the APLs to ascertain whether these investments are excluded due to bias or whether they simply are not good investments. Assertions that all advisers in bigger dealer groups are one trick ponies that only support the in house product are simply false.Similarly arguing that smaller groups that offer a fully implemented solution to their clients via a vertically integrated model breaches their fiduciary duty is only valid if the alternative individually tailored portfolio is demonstrably better and not recommended when appropriate. Baseless judgemental comments divide. Informed debate raises the standards and forms the basis to self regulate our industry. Until we can be seen to be capable of that, we will be subject to regulations determined by the most influential lobby group.

  • alleycat on 5/08/2013 5:43:30 PM

    How interesting that two of the commentators see no conflict between their parent owned AFSL and the owner and manufacture of many of the products on their APL co-exist.

    Guys since you have a limited APL you have no idea what's better or less risk adverse for your clients to do any comparisons.
    Unless you are willing to pay for research in the investment universe, which I doubt, you will never have the client's best interest in that space because of your limitations.
    Banks,Fund Managers, and Insurance Company owned Dealer groups rely on the lack of transparency required by independently owned Licensees.

  • Garry Crole on 5/08/2013 4:24:28 PM

    I am of the view that product owned distribution networks is fine as long as it is disclosed clearly in the branding of the AFSL

    Personally I am of the belief that bank or insurer owned AFSL's should all hold the product manafacturer brand in their name , so that the consumer has no confusion as to any potential conflicts of interest

    AMP Financial Planning is a clear example of a brand name that is clear to the consumer where the ownership is held

    The example of a Financial Wisdom brand not being as easily known could confuse the consumer particuarly where a CBA manafactured product is reccemended to such clients

  • Matthew Ross on 2/08/2013 1:12:21 PM

    Being truly independent is the way of the future for any younger advisers who plan to be around for the next 20+ years.

  • Bates on 2/08/2013 12:17:14 PM

    ASIC’s Phase 2 Report woke up early this week to the fact that the majority of big advice firms are majority owned by big product firms and the majority of the advice income comes from product.
    And Roy Morgan Research today announced that more than half of the clients of CBA owned Financial Wisdom thought their adviser was independent.
    I have advisers saying clients don’t care.
    We (the advice industry) are the only ones that seem obsessed by ownership structures. “If you walk into Ford, you buy a Ford.” ...goes the old argument
    Advisers say- “where is the problem if my client pays me from the cash account of their wrap account?”
    There is no problem, unless the wrap platform is owned by the same institution as the parent of the advice company.
    There is no problem, unless the wrap platform is the only one offered to the client by the advice company.
    There is no problem if the wrap platform and the advice company and the parent company are all branded the same.
    The banks have bought and retained separate branding all along the distribution chain for good reasons
    And the clients ...do they know?, do they care? Is this only a problem in our imagination?
    If its only in our imagination, why then do only 15% of NAB Financial Planning clients think their adviser is independent while 48% of Godfrey Pembroke clients think their adviser is independent?

  • James Smith on 2/08/2013 12:05:10 PM

    The insinuation that recommending an in house product is in breach of a fiduciary duty assumes that the alternative is better. This may well be the case but the danger is the assumption that because the advice is independent it is in itself better. The fiduciary duty also involves ensuring that the alternative has adequate risk management and accountability. In other words how does the alternative compare to the in house alternative. Not enough emphasis has been put on this point in the debate. The increase in the number of SMSF with low account balances suggests inadequate cost/benefit analysis are driving these decisions and perhaps an in house solution would have been more appropriate. A professional puts the clients interest first by basing their advice on what is in the best interest of their client not their own ego or the story they want to sell.

  • Alistair on 2/08/2013 11:25:29 AM

    Ah yes the idea of an independent adviser. These folk have been progressively destroyed year after year with paperwork under the veil of compliance such that clients are driven back to the institutions to continue to ply there trade and practices. FOFA and the best interest duty is not served in the process. After all how can ANY adviser including the industry funds claim to be placing their clients interest ahead of their own. Answer is simply they cannot. Advisers should instead be able to be professional and not put the whims of their dealership and its parent ahead of the client. This happens all to often with some groups claiming to give you a large Approved Product List but showing more favor towards the adviser that promotes the parent. As for Industry Funds, they ought be exposed for the frauds they truly are as they are swinging a bat against advisers. Look, we all know that in this industry there are some rogues much like any trade or profession. This government chose to hurt the majority of advisers and are attempting to destroy their lives and businesses they have work a lifetime to build. Government should think about introducing these rogue advisers and their masters to jail. The majority of advisers are hard working and decent.
    Obviously, the public are being taken for mugs if they think their is independence in the advice world and we have an inept and incompetent government and their BS laws via FOFA to thank for that not to mention your friend and mine - the FPA who merely went with the story, only it seems, to protect their own space in the mess we now have as an industry. Quite frankly unless the leadership of the FPA were blind, drunk or high, their derelict input into FOFA should be viewed with closer inspection and suspicion. Way to go government and the FPA - we should think of you at the polls and when our fees are due hey.

  • Coastie on 2/08/2013 11:22:51 AM

    Maybe the lack of trust is engendered by a concerted campaign by the industry funds to paint financial planners in a bad light. Painting commissions as an evil, and implying you are being ripped off.

    As has been said, as long as you are actually providing a service then the process with how the client pays - whether its comms, asset based % or a set fee - is to some extent irrelevant. The issue is where advisers are receiving payment and not doing anything for it.

  • Matthew Lock on 2/08/2013 9:59:15 AM

    I fear that few planners truly understand the depth and breadth of the meaning of independence. Underpinning all that is FoFA, is hundreds of years of doctrines and legal principles called Equity from which an adviser’s fiduciary duty and obligations toward their clients is drawn. If an adviser places themselves in a position of conflict of interest with their client they are potentially in breach of their fiduciary obligations and if the courts are unable to prosecute poor behaviour by an adviser based on the existing regulatory regime I am sure they will revert to an adviser’s fiduciary duty in a heartbeat. Now I'm not saying that an institutional adviser is any less honest, diligent or professional as the best advisers in the industry. However I am querying whether an adviser can meet their fiduciary obligations to their client while working for a product issuer be it a bank or vertically integrated Dealership?

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