A new study has revealed that over one-third of clients of institutionally-owned financial advice groups believe their adviser is ‘independent’.
The survey, conducted by Roy Morgan Research, asked consumers with a financial advice relationship to identify whether their advisers were ‘independent’ or ‘tied’. The results showed that, on average, over 30% of clients of bank-owned advice licensees still considered their advisers to be independent.
The trend was particularly noticeable among licensees that were branded differently to their institutional owners. For example, 48% of NAB-owned Godfrey Pembroke clients perceived their planners as independent, and 51% of Financial Wisdom clients said their advisers were not tied, despite the fact the group is owned by CBA.
… considerable confusion remains regarding the extent to which the planner is perceived to be independent
According to the researcher, the study shows that considerable confusion remains among the users of financial planners regarding the extent to which the planner is perceived to be independent.
However, the notion of independence was not limited to groups which used a different name or brand to that of their parent company. 21% of Commonwealth Financial Planning clients still viewed their advisers as independent, and nearly 30% of AMP Financial Planning customers were also convinced their advice provider was non-aligned.
“With a large proportion of advisers being owned by fund managers the need for clients to understand the extent to which their adviser is independent will become critical and should not be confused by branding,” said Norman Morris, Industry Communications Director at Roy Morgan Research.
He said that with the Future of Financial Advice reforms now in place, it was more important than ever that clients understood the extent to which their planner was independent. While the Australian Securities and Investments Commission has previously advised that planners can recommend their parent company’s own product and still comply with the best interests duty, Mr Morris hinted that the misrepresentation of a brand may lead to a continued lack of trust of the profession.
Do institutionally-owned dealer groups pay more commissions to their advisers for recommending the parent company's products? If so, they aren't independent all all, are they?
I may be naive in asking this, but if there is financial incentive to recommend for example a bank-owned life-risk product compared with another, then the adviser is pretty much acting as an agent for the parent company, not a broker who is to all intents and purposes acting for the client. It is one or the other.
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