ASIC makes decisions on conflicted remuneration
Future of Financial Advice (FOFA)-related conflicted remuneration arrangements are already emerging as an issue for the Australian Securities and Investments Commission (ASIC), according to its latest Overview of Decisions report released this week.
While the regulator took no action with respect to service-based commission arrangements within one Australian Financial Services Licence-holder, it acted against an adviser group providing advice, including intra-fund advice, to both employers and employees with respect to default superannuation.
In explaining its approach, ASIC said the adviser group in question included adviser firms providing financial advice to employers about the choice of a default superannuation fund in return for a service fee paid by the employer.
"Further, a member of the adviser group was paid a service fee by the administrator of the relevant superannuation fund where general advice services were provided to an employee," it said.
However ASIC said the substance of the advice given by the adviser firm in relation to a default superannuation fund "might be influenced by the payment of the service fee". It said this was because the adviser would have been aware that, if an employer was given advice about the choice of default fund, there was a prospect that the adviser would be asked to provide advice services to the employees of the relevant employer in return for the payment of a service fee.
"The existence and possible extent of fees from giving advice to employees in the future, particularly where some default superannuation funds will be known by the adviser to pay higher fees than other funds, might have influenced the adviser in giving advice to the employer in the first instance," the ASIC report said.
The regulator said it had declined the request of the advice group because "there was a real risk that benefits paid to members of the adviser group for the provision of advice services could have been used to influence the advice provided to employers and employees".
"This is the mischief that the conflicted remuneration provisions were designed to prevent," the ASIC report said. Further, it stated that the adviser group's situation was not unforeseen and it had been open to it to change the structure of arrangements to ensure advisers did not get caught by the ban on conflicted remuneration.
AUTHOR
Mike Taylor
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
