ASIC urges planners to review research arrangements
The Australian Securities and Investments Commission (ASIC) has urged financial planners to reassess the business and payment models of their funds management research houses and to also examine how they produce managed fund ratings.
ASIC has sent the reminder to the advisory profession as all research providers are required to comply with updated conditions under Regulatory Guide 79 (RG79) ‘Research report providers: Improving the quality of investment research', from September 1 2013.
ASIC stated that "not all research is the same and nor is each research provider" and financial planners should test the market and re-evaluate the business models of research providers. Planners were also encouraged to check the ability of research houses to handle conflicts of interest; how they produce ratings; and what they mean.
ASIC Deputy Chairman Peter Kell said a highly rated product was not an indication that it would be suitable for every client. He said financial advisers were still responsible for advice, but investment research was an important ingredient in formulating quality advice.
"To make this assessment, we encourage all advice providers to do their due diligence on their third party research provider to ensure that quality inputs go into their advice businesses," Kell said.
Planners should ask about the level of experience and turnover of research provider staff as well as the selection and ratings criteria for products being rated. They should also examine the service offering and ensure communications were clear and the research demonstrated a measure of quality control.
ASIC released the updated RG79 in December last year which directed research providers to manage any conflicts of interest and to outline the quality, robustness and transparency of their research processes.
When speaking with Money Management in May, the research houses typically used by financial planners indicated they had been ready for the updated RG79 conditions well in advance of the 1 September start date.
AUTHOR
Jason Spits
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.
