Recent research has showed financial advisers are more, and not less, likely post-FOFA (Future of Financial Advice laws) to recommend in-house products and even retail as opposed to industry superannuation.
Sure FOFA has only just kicked in but the Roy Morgan survey shows big increases in the number of retail super clients who came through a planner 43% compared with 28% the previous year. And planners only provided 7% of new industry fund members.
One question consumers may well ask is about the much-debated best interests duty.
Of those who went to a planner owned by the big players 77% were placed in an in-house product or super fund. The winners if you like were Westpac and BT Advisers, which had the highest proportion of clients sold in-house super at 82%, and Commonwealth Bank and Colonial First State with the largest increase of 71% up from 64% in a year.
How is it so? One answer might be that while FOFA focused on commissions and conflicted remuneration it didn’t consider ownership. There are those who see vertical ‘dis-integration’ as a valid policy response and not some over-the-top intervention akin to detonating an atomic bomb under the industry structure.
But as ASIC Commissioner Peter Kell told a super conference in late April while the regulator remains concerned about the inherent conflict of interests in vertically-integrated advice businesses there is an upside.
“The financial capacity of these larger businesses means they are typically able to ensure compensation for their clients if something goes wrong and there is a decision against them - for example, the ombudsman scheme,” he said. “However, there are also inherent conflicts of interest created by vertical integration. It may not always be readily apparent to consumers.”
The most obvious answer as to why planners might sell their owner’s product above all others is because they can and do despite all the huffing and puffing about FOFA.
Perhaps they are considering their clients’ best interests but as Commissioner Kell says the inherent conflicts are not obvious to consumers.
So should we be surprised planners seem so keen to push their owner’s product?
by Christopher Zinn, Campaigns & Communications Director