Researchers fear ASIC survey fallout

A requirement for selected advisers to send the Australian Securities and Investments Commission (ASIC) samples of product research as part of its Quality of Advice project has raised concerns among some researchers.

ASIC has requested advisers send it “any financial product research material, including product comparisons” used to formulate client advice samples.

They’re also required to include Statements of Advice (SOAs), Statements of Additional Advice, Records of Advice and other material in the samples, which were required to reach the regulator by May 8 this year.

The documents and the research form the basis of the project, enabling ASIC to “measure the quality of personal financial product advice currently provided”.

Morningstar head of research Anthony Serhan said he was concerned ASIC might end up with samples that do not capture all of the third-party research considered by an adviser when giving advice to a client.

“ASIC is asking for research available at one point in time, but research that goes into a product that goes into a client portfolio is typically considered at various levels across various time periods.”

Serhan also said he did not understand ASIC’s requirement for an inclusion of product comparison research used in the formulation of the advice samples.

“In coming up with our recommendations there’s a degree of peer group relativity built into the quantitative part of the product analysis by most researchers,” he said.

Van Eyk Research director Stephen van Eyk said ASIC’s request could have potential implications for researchers as a result of its policy of dating all of its research.

“If an adviser were to submit a sample to ASIC in which our research from a previous period had been used to make an advice decision, it could be seen as a problem.”

Zenith Investment Partners director David Wright said the Quality of Advice project could bring an end to a trend by advisers to streamline SOAs through the research component.

“Many advisers use a one-page profile type document as the proxy for the main (product) research in the SOAs, with this additional research carried in the appendix,” he said.

“However, the sample SOAs could prompt ASIC to direct the detailed product comparisons be carried within the SOAs — which is, of course, only going to increase the length of the SOAs.”