AFA questions bank-tied adviser disclosure

THEAssociation of Financial Advisers(AFA) has warned that the salaried financial advisers of banking institutions may not have to disclose all the influences inducing them to recommend their employer’s own financial products, which it says was the intention of the new Financial Services Reform (FSR) regime.

AFA research officer Dugald Mitchell says bank authorised representatives may be influenced by their required minimum levels of performance, such as a premium income per month, though this may not require disclosure.

“Where an adviser may have to bring in a certain amount of income or get the boot, we see this as a strong or even stronger influence than commission, but it won’t have to be disclosed,” Mitchell says.

He says such an arrangement could favour “the big-end of town” because advisers working for institutions will not have to disclose this influence while other advisers would still have to disclose all the commissions they receive.

Mitchell says under the FSRA all information relating to remuneration or commission that advisers receive should be disclosed if it is generally accepted to be something that would influence an adviser.

According to Mitchell, one of the reasons commission disclosure on risk products was abandoned in the UK was because it could not be done without favouring one section of the industry.