Client Best Interests Compromised by Cross-Selling?

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Is it possible to cross-sell a restricted range of financial products and still serve the customer's best interests?
  • No (54%)
  • Sometimes (24%)
  • Yes (22%)
  • Not sure (0%)

The majority of advisers reject the notion that it’s possible to cross-sell a restricted range of products to clients and still serve their best interests.

Addressing the heightened industry debate currently surrounding client best interests (see: CFPL Scandal… and Serious Conflict Posed by Vertical Integration), 58% of respondents to our latest poll believe a customer’s best interests cannot be served if they have access only to a restricted or limited range of products, as is typically the case within vertically integrated organisations, such as banks and their distribution networks.

One in four advisers believe it is sometimes possible to serve client best interests under these circumstances, while 18% believe client best interests can be served.

One adviser has offered a realistic assessment of the situation, given the current structure of the financial advice sector.  He said he sees no issue in companies trying to cross-sell a product that may improve the client’s financial position, but:

“I see the problem being that a company may only offer their own products, when there may be 10 more appropriate products in the market.”

having a suitable product (rather than most appropriate product) is better than not having any of these products at all

However, the same adviser added,

“… I guess having a suitable product (rather than most appropriate product) is better than not having any of these products at all.”

Another adviser said he believes the main point in this debate is related to cross-selling in an environment where only a subset of the products in the market is available for purchase. But this adviser also observed that compliance obligations relating to advice (general vs personal) and the availability of cooling off periods offer “… enough consumer protection… to minimise issues.”

So, we have received a majority opinion that cross-selling a restricted range of financial products cannot accord with what is in the client’s best interests. But there also seems to be a feeling that, as long as all other compliance obligations are met, and as long as the products are ‘suitable’ for the client, even if they are not the most appropriate, then this is better than the client receiving no advice and no financial products.

Does this approach set the bar too low in terms of client expectation and industry professionalism?  Or does it simply reflect the reality of the current industry advice structure? And to what extent does the answer to our poll question change if you drill down to the types of financial products under consideration?  This is not a straight-forward issue and it does not appear to offer a simple solution. As always, we welcome your views…



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4 COMMENTS

  1. I am an AR for a vertically integrated licensee, who previously had two non aligned platforms on the APL. One was removed without any explanation or notice, we simply received an updated APL.

    Given that most wraps and platforms are reasonably mature, if the regulator allowed licensee’s to have an APL on product but not wraps and platforms, I believe this would overcome a lot of the conflict of whether we are acting in a clients best interest. i.e. allow CBA aligned advisors to use BT, One Path and MLC platforms and vice versa.

  2. As an ex vertically aligned licensee AR, I find that I can now provide advice to clients who are members of any platform or place them in a platform that was not on the previous licensee APL.

    This has provided an extra degree of professionalism to our business.

  4. Let’s be realistic about this. Very few advisers would be providing advice to client’s on any platform or product in the market. It is not practical from a business and admin perspective and results in you having to manage a high number of log-ins and passwords. Many of the platforms in the market are capable of meeting BID from a fee, admin and insurance perspective and most advisers in the market cannot collect fees via an industry fund. With regards to vertical integration – Trevor F, you might be surprised to know that while BT, OnePath & MLC etc may not be on the actual APL, CBA advisers do have a process in place where they can easily provide advice on almost all of the other major retain and corp super platforms without needing to seek approval.

    But why is this whole issue around advisers and advice. The government should be putting the microscope on retail and industry funds. Why can’t the funds management, platform and super industry get it together and feed client information into the major financial planning software packages or some other centralised system (where an adviser can be registered with a specific client) and open up ALL funds to allow fees to be paid by client authority. This would remove the need for APL’s and client’s could access any adviser they choose for advice on their existing product without fear they will be moved into something that is not really appropriate for them.

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