Managing conflicts is the key

There are many facets to Macquarie Bank, and conflicts of interest are inevitably going to occur, but the financial services giant believes it has established a framework to counter this.

Macquarie Financial Services commercial and operations manager Carolyn Tregarthen says the framework is in place to deal with conflicts that arise between its clients, business and, in some instances, its employees.

In particular, the various divisions of the bank have compliance officers who maintain databases of conflict policies.

Macquarie also monitors benefits to advisers that might influence decisions and create a conflict.

“We record all gifts to all advisers, and any benefit that an adviser receives worth more than $300 must be recorded on the Financial Planning Association/Investment and Financial Services Association public register, which is available to the public on demand,” she says.

“If an adviser were to accept a fund manager-funded trip, that would have to be signed off by the group head and included on the publicly available register. To date, no trips have been taken.”

But with the financial services giant’s broad product base, it would be hard for advisers not to include some Macquarie products on occasions.

Tregarthen says there is an investment committee to review all products, including both internally and externally generated investments. This committee selects products for the approved list based on diversification for the client base. This diversification strategy can mean an external product is selected over a Macquarie investment vehicle.

“If we find a UBS or a Perpetual product has better features or administrative issues, and is in demand from our advisers because of the benefits that it gives their clients, it will be included on the list over a Macquarie product,” she says.

“Alternatively, we might exclude a Macquarie product if there are already a number of similar products on the list.

“Our policy is to recommend diversification through best-of-breed products to clients, no matter who the product manufacturer is.”

Ultimately, it is the client that makes the final investment choice, based on research on a number of products in a particular asset class recommended by the adviser, Tregarthen says.

She says conflicts can be managed through the use of policies such as ‘Chinese walls’.

“The framework has been developed to incorporate ASIC’s Policy Statement 181 Licensing: Managing conflicts of interest,” Tregarthen says.

“The basis of this framework is to manage conflicts by controlling, disclosing, or avoiding actual or perceived conflicts of interest.”

Macquarie has also established restrictions on certain practices that may lead to potential conflicts, and these details are maintained in databases, which are published throughout the company.

“In addition, special escalation procedures have been documented if it is considered that the framework might not be enough to adequately address the conflict,” Tregarthen says.

“These procedures apply to everyone, including directors, officers, staff, contractors and consultants, regardless of whether they are full-time, part-time or temporary.

“All staff are required to ‘sign off’ that they have read and understood this policy, and continued training is provided to everyone to remind them about this obligation.”