Do managed accounts equate to in-house products?
Advisers using managed accounts have been cautioned to ensure that they are implementing clients’ best interests in circumstances where the Australian Securities and Investments Commission’s (ASIC’s) managed accounts project will be closely examining the issue.
Partner with specialist financial services law firm, The Fold, Simon Carrodus, has drawn parallels between advice around managed accounts and that around in-house products which became the subject of ASIC scrutiny of the big five financial institutions – the Commonwealth Bank, Westpac, ANZ, National Australia Bank and AMP.
“It would be naive to think that such conflicts only occur at the big end of town. The same conflict affects many small to medium-sized advice businesses (including those that use managed accounts),” Carrodus wrote in an analysis covering ASIC Report 562.
“We know that ASIC’s managed account project is focusing on a number of issues including fees, suitability and - you guessed it - conflicts!” he wrote.
Carrodus said that while in-house product recommendations were not prohibited pursuant to the Corporations Act or the FASEA Code of Ethics, advisers needed to take appropriate steps to prioritise their clients’ interests above their own.
“It’s not enough for an adviser to merely disclose the conflict. The adviser must explain why the in-house product is likely to leave the client in a better position and how it is more likely to satisfy the client’s needs and objectives (vs the client’s existing product),” he said.
Recommended for you
Sequoia Financial Group has declined by five financial advisers in the past week, four of whom have opened up a new AFSL, according to Wealth Data.
Insignia Financial chief executive Scott Hartley has detailed whether the firm will be selecting an exclusive bidder for the second phase of due diligence as it awaits revised bids from three private equity players.
Insignia Financial has reported a statutory net loss after tax of $17 million in its first half results, although the firm has noted cost optimisation means this is an improvement from a $50 million loss last year.
With alternative funds being described as “impossible” for fund managers to target towards advisers without the support of BDMs for education, Money Management explores the evolving nature of the distribution role.
