Can you put a price on Independence?
We don’t think so. We think it should actually be mandatory for a financial adviser to be independent of the financial products and services they recommend.
Since 1 July 2021 financial advice firms have been required to disclose whether they provide independent, impartial or unbiased financial advice and if not why not. It may shock you to know that only around 2% of advisers and advice firms are actually independent – as defined in section 923A of the Corporations Act. This disclosure now needs to be clearly set out in the financial service guide (FSG) of the relevant financial advice firm.
Advisers qualify as independent if they or their Australian financial service licensee and all authorised representatives do not receive (non-rebated) insurance commissions, any gifts or benefits from financial product providers, have no restrictions pertaining to the financial products or services they are able to recommend and do not own (including any interest in or association with) and are not owned by a financial product provider.
Most people need financial advice to make better financial decisions and take charge of their financial future. However, if most financial advisers are associated with financial product providers and have restrictions on which financial products they are able to recommend, how confident can you be that recommendations are actually made in the best interest of a client?
If you visited a doctor who was employed or associated with the medications they prescribe, how confident would you be in taking any medication prescribed by them? This is the problem with non-independent advice.
The financial services industry certainly has a chequered history which continues today in terms of vertical integration of advisers with product providers and conflicts of interest at every turn. The Royal Commission and investigations before that have attempted to restore public confidence in financial advice with a raft of disclosures and legal requirements, however there is still no requirement that an adviser be independent.
At least non-independence now needs to be disclosed. If more consumers make informed choices about who they appoint to provide them with financial advice then this should help point the industry in the right direction. Make sure you check in the FSG whether your adviser is independent.
 Based on analysis conducted by The Fold Legal Pty Ltd in June 2021.