Is vertical integration the real problem?
Any Royal Commission into the banking and financial services industry should have a strong focus on vertical integration and the manner in which has blurred the line between product and advice, according to a survey conducted by Money Management.
The survey has revealed that while more than 70 per cent of around 300 respondents did not believe a Royal Commission was warranted, it also revealed a similar number who held concerns about the impact of vertical integration, and who believed it was a major underlying cause of the calls for a Royal Commission.
With the majority of respondents being financial planners, the strong message in their comments was that a Royal Commission encompassing financial planners was unwarranted because the planning industry had already been the subject of high levels of scrutiny by both the Australian Securities and Investments Commission (ASIC) and a number of Parliamentary committees.
However, most of those same respondents were heavily critical of the banks and were among the 68.9 per cent of people who believed that vertical integration had created at least some of the problems which had given rise to calls for a Royal Commission.
The responses made frequent references to inherent conflicts of interest within vertically-integrated entities and a failure to adequately separate a sales culture from the need to meet client best interests.
The survey also detected continuing resentment against the Life Insurance Framework with a relatively small number of respondents pointing to the need for closer scrutiny of claims handling procedures by insurers.
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