The AIOFP have released a list of all the failed and frozen funds in Australia from January 2006 to November 2012, and discovered one common factor – they all paid a research house to rate their product.
The list contains 155 individual structures with varying asset classes, from Great Southern Agribusiness, valued at about $4bn, to DWS Strategic Value Fund at $100,000.
AIOFP Executive Director Peter Johnston said financial planners were now the only ones who could stop the conflicted practise of using research houses that accept payments from product manufacturers.
“ASIC can only do so much to intervene in commercial terms. Advisers are the only faction that should be paying research houses and must start refusing to use research houses who accept payments from product manufacturers,” he said.
In 2011 the AIOFP produced an article suggesting that every adviser should be levied a yearly fee, say $1,000, managed by ASIC to fund a panel of research houses who only supply information to advisers and are not permitted to accept any payments from product manufacturers.
The panel would then also scrutinise all PDS's, which are not currently being checked for commercial viability by ASIC before market release.
"Unfortunately we have all been under the illusion that ASIC assess the PDS’s before market – they don’t, they continually say they don’t but no one is listening," said Johnston.
"[Research houses] are unofficially empowered with the decision making role on which manufacturer’s products are good, bad or exceptional and whether they commercially survive.
"They have unfortunately become the unofficial ‘gate keepers’ of the industry with far too much power in our view."
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