ASIC warned on research payments ban
Research house Lonsec has warned the Australian Securities and Investments Commission (ASIC) to resist revisiting a possible ban on direct payments from fund managers to research providers, saying it would ruin the availability of research for financial advisers.
Speaking at Lonsec's annual roadshow in Melbourne, Lonsec manager of research strategy Richard Everingham warned that if the regulator decided in future to move against the direct payment model, it would reduce research house competition and reduce the total amount of available research.
Everingham also criticised suggested payment options such as a pure user-pays subscription model as unworkable.
A pure user-pays model may be viable in the future, but not at present, Everingham said.
"You won't pay that [full] cost of research, it is a very intensive activity, and very, very expensive," he said.
Financial advisers only value research at one-tenth of the cost of what it actually costs to produce, Everingham said.
Financial planners would also possibly pass on the cost of research, which would be an anti-Future of Financial Advice move, he said.
Lonsec receives direct payments from fund managers to underwrite the cost of research.
Everingham claimed external market evidence showed the direct payment model did work. Financial advisers are free to choose which research house to receive ratings from, he said.
Any conflict of interest arising from payments from fund managers to research houses can be managed robustly and effectively, Everingham said.
"This is a conflict we work under, but like in lots of areas of business, it's not the fact that you've got a conflict, it's how you go about managing it," he said.
Recommended for you
Net cash flow on AMP’s platforms saw a substantial jump in the last quarter to $740 million, while its new digital advice offering boosted flows to superannuation and investment.
Insignia Financial has provided an update on the status of its private equity bidders as an initial six-week due diligence period comes to an end.
A judge has detailed how individuals lent as much as $1.1 million each to former financial adviser Anthony Del Vecchio, only learning when they contacted his employer that nothing had ever been invested.
Having rejected the possibility of an IPO, Mason Stevens’ CEO details why the wealth platform went down the PE route and how it intends to accelerate its growth ambitions in financial advice.
