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
Money Management examines the share price of financial advice licensees over one year to 31 March, with M&A actions in the final quarter having a positive effect for two licensees.
A $3.5 million settlement for victims of Melissa Caddick has been approved by the Federal Court following an initial agreement last December.
The Reserve Bank of Australia has delivered its first rate decision since the introduction of a new board structure last month.
Digital advice provider Otivo has launched an interactive tool, powered by artificial intelligence and Otivo’s own advice engine, to help answer client questions.
