The majority of consumers are still confused about whether financial planners are aligned or independent, recent research shows.
In its latest superannuation and wealth management report, Roy Morgan Research found the majority of customers using Financial Wisdom (CBA) or Godfrey Pembroke (NAB/MLC) perceived the financial planner as independent.
Roy Morgan said not understanding who is independent or not may contribute to a lack of trust towards the profession.
Association of Independently Owned Financial Professionals chief executive Peter Johnston told Wealth Professional
the public is confused due to a lack of transparency over independence.
Before 2005, advice firms had to display which bank or super they were aligned to on their letterhead or business cards. For “some unknown reason”, after 2005 ASIC directed advisers no longer had to do this, said Johnston.
“We would like to see that transparency come back, so customers know right from the moment they walk in the company’s door where that adviser is aligned to.
“Instead, these practises are masquerading and appear to be independent but are not. Consumers don’t want to be duped and that’s what’s happening.”
AIOFP have been lobbying Senator Arthur Sinodinos since he got into office to change it to the status quo.
Independent advisers also need to better educate the public as to what independence means, said Johnston.
“We have nothing against people seeing banks. But given a choice, we think consumers would rather see an independent adviser and have a choice of three of four institutions rather than one.”
There is confusion over what ‘independent’ is defined as – which leads to greater misperception in the marketplace, said Johnston.
While ASIC defines an independent adviser as someone who does not receive commission from any product, AIOFP disagrees. “We think the critical factor is who owns the licence,” Johnston said.
Current estimates put 80% of financial advisers as institutionally aligned, so out of around 17,000 Australian advisers, just 3,400 are independent.
It may be the message as to who is really independent will get out to the public as greater numbers of advisers become independent licence holders.
Because with the worst part of the GFC over and a new government at the country’s helm, there is a definite shift towards advisers wanting to become independent, Johnston said.
“With independent advice, consumers get the benefit of getting an unbiased view on where their money should be placed. And for the adviser, there is freedom of choice to offer a product without fear or favour.”
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