The AFA has labelled efforts by ASIC to restrict the usage of terms relating to ‘independence’ from institutions and product-providers as too narrow and not reflective of the actions of advisers or the views of consumers.
Responding to ASIC’s announcement that it had limited who could use the term ‘independently owned’, ‘non-aligned’ and ‘non-institutionally owned’ under terms set out in Section 923A of the Corporations Act, the AFA stated the legislation was ‘unnecessarily restrictive’ and there were very few advisers who would be able to use the terms under the new stricter definition.
AFA Chief Executive, Philip Kewin said the definition included factors that did not impact on independence in the delivery of advice and any test of independence “…should be in the eyes of the consumer and not influenced by structural considerations that are included in the current legislation”.
Kewin said the AFA took the view that an adviser under a licensee that was considered to be ‘non-aligned’ and operating with a broad APL that included a non-approved product process, could remain independent in when selecting products even if they received commissions for life insurance advice.
…any test of independence “…should be in the eyes of the consumer and not influenced by structural considerations that are included in the current legislation”
“If, as is currently the case, every insurer offers commissions at a broadly similar level, which will shortly be restricted by the Life Insurance Framework, then how does the existence of commissions influence the independence of the selection of a product?” Kewin said.
“Equally, if a licensee receives volume bonuses, from a range of investment and superannuation product providers for existing pre-FoFA business, then how does this influence the independence of advice provided by the advisers to new clients?” Kewin added.
Kewin said the AFA considered the best way to restrict the use of the terms was by legislative change while recognising the work some advisers have already done to present themselves as independent, impartial and unbiased.
“Many advisers have gone to great lengths to establish themselves and their businesses as ‘independent’ and ‘non-aligned’, often at great expense, yet only a few would now qualify under the current strict definition of ‘independent’,” Kewin said.
“It is obvious that these words cannot be used in the institutionally-owned space, however we do believe that they should be available for more than the current legislation allows,” he added.
Congratulations AFA. We need to be ever vigilant to constantly point out that the “emperor is not wearing clothes”, and in this case, does not own a wardrobe. ASIC are once again over-interpreting things to the detriment of the industry. Now lets get some political response
Next cab is that ridiculous foggy “sample risk SOA”
Does ASIC allow a Bank-owned AFSL to use the term “Bank-Owned” or “Institutionally Owned ” in their marketing or promotional material if they wished to do so ?
If these terms are allowed, then it surely must be acceptable to utilise the terms ” Non-Aligned or Non-Bank Owned” or “Non-Institutionally Owned” as clarification to the consumer.
The use of these terms to identify the ownership status of an AFSL or Authorised Representative’s business, does not have any relationship to the type of remuneration model employed by that business or the options provided to the consumer.
If these terms to identify the ownership structure of a business are not acceptable, then it is discriminatory against a whole sector of financial services and entirely anti-competitive.
Should the ACCC be investigating whether this is a fair and equitable enforcement on small business?
Perhaps this is a case for the Effects Test to actually be tested ?
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