Confusion Over Adviser Independence

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Australian consumers are still confused when it comes to the issue of financial adviser independence, according to a new survey by Roy Morgan.

The bi-annual Roy Morgan Research Superannuation and Wealth Management in Australia Report considers various elements of consumer financial behaviour, where the researcher focuses on a core group of financial service providers known as the ‘big six’ (AXA, AMP, NAB/MLC, CBA, ANZ and Westpac), representing the majority of consumers with financial products.  It found that consumers with a relationship with a licensee owned by one of the ‘big six’ were still likely to view their adviser as independent.

51% of consumers receiving financial advice from a NAB/MLC-owned Garvan financial planner believed they were independent, as did 45% of RetireInvest clients (linked to ANZ) and 43% of Hillross clients (owned by AMP).

Interestingly, even when the adviser’s business was branded with the name of the bank or large provider, there was confusion over the issue of independence, with 30% of AMP Financial Planning clients and 33% of AXA Financial Planning clients saying they classified their adviser as ‘independent’.

Roy Morgan said this perception will have implications for how Count Wealth clients will view the recent takeover by CBA.  The researcher also suggested the results ‘… may go some way in explaining the lack of trust that currently exists towards the profession’, citing its 2011 Image of Professions Survey which revealed that only 28% of the population rated financial planners as either ‘Very High’ or ‘High’ for ethics and honesty.

… AMP planners were the most likely to recommend their own products

Further impacting the perception of independence was the finding that 70% of products recommended by advisers working for an institutionally-owned licensee were provided by the parent company. 

According to the report, AMP planners were the most likely to recommend their own products, with 78.9% of their members directed into AMP managed products, followed by CBA/Colonial at 76.3% (in the 12 months to June 2011).  At the opposite end of the spectrum, only 41.5% of ANZ/OnePath advised customers were sold the group’s products.  It was recognised in the report that these products may contain some funds managed externally.

Other key findings from the report include:

  • Women, who make up 50.6% of the Australian population, hold just 36.2% of the total superannuation dollars
  • Similarly, women are nearly 50% more likely than men to rely on the Age Pension in retirement
  • 48% of those consumers who had changed superannuation providers over the previous twelve months said they had done so because they had changed jobs
  • Total household debt has increased by 5.1% over the past year
It is difficult to see how the banning of commissions and trailing commission on financial products will raise the level of usage of professionals

The researcher also raised concerns about the likelihood of the FoFA reforms having a positive impact on the number of Australians seeking financial advice, saying that those seeking advice tend to be older, have a higher personal income, and have a larger balance in superannuation. 

‘It is difficult to see how the banning of commissions and trailing commission on financial products will raise the level of usage of professionals, particularly given the lower value clients who are unlikely to want to pay for this advice,’ the report stated.



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