According to the results presented in Report 562, the reviewed ASIC’s financial approved product lists comprised 21% in-house institutions’ products and 79% external products. As a result of receiving personal advice from the advisers, 68% of the total funds invested by licensees’ customers were placed into in-house products, with 32% of such funds invested in external products. ASIC did note that they did not expect financial advisers to recommend financial products in the same ‘in-house’ proportion as the number of financial products on an approved ‘in-house’ products list. ASIC also found that advisers from the five financial institutions that were the focus of Report 562 could only demonstrate compliance with the best interests duty through the use of the safe harbour steps in 25% of the customer files reviewed. Additionally, ASIC found that for 10% of the customer files was readily apparent that customers were likely reviewed, ‘it to be significantly worse off as a result of following the and that for advice’ the remaining balance of reviewed customer files (65%), these files not ‘did demonstrate that the customer would be in a better position following the advice’. Some regulatory issues Remuneration arrangements The remuneration arrangements of the Australian financial planning industry have been the focus of regulatory consideration and legislative activity – most notably the Future of Financial Advice reforms. (‘FOFA’) The following information provides a brief comparison of the main remuneration arrangements of the Australian financial planning industry before and after the introduction of the FOFA reforms. Main forms of remuneration arrangements before the FOFA reforms Prior to the FOFA reforms, the three main remuneration arrangements for the industry were: Fee-for-service; Commissions; and Bonuses
According to the results presented in ASIC’s Report 562, the reviewed financial institutions’ approved product lists comprised 21% in-house products and 79% external products. As a result of receiving personal advice from the licensees’ advisers, 68% of the total funds invested by customers were placed into in-house products, with 32% of such funds invested in external products. ASIC did note that they did not expect financial advisers to recommend ‘in-house’ financial products in the same proportion as the number of ‘in-house’ financial products on an approved products list. ASIC also found that advisers from the five financial institutions that were the focus of Report 562 could only demonstrate compliance with the best interests duty through the use of the safe harbour steps in 25% of the customer files reviewed. Additionally, ASIC found that for 10% of the customer files reviewed, ‘it was readily apparent that customers were likely to be significantly worse off as a result of following the advice’ and that for the remaining balance of reviewed customer files (65%), these files ‘did not demonstrate that the customer would be in a better position following the advice’. Some regulatory issues Remuneration arrangements The remuneration arrangements of the Australian financial planning industry have been the focus of regulatory consideration and legislative activity – most notably the Future of Financial Advice (‘FOFA’) reforms. The following information provides a brief comparison of the main remuneration arrangements of the Australian financial planning industry before and after the introduction of the FOFA reforms. Main forms of remuneration arrangements before the FOFA reforms Prior to the FOFA reforms, the three main remuneration arrangements for the industry were: Fee-for-service; Commissions; and Bonuses
features-of-the-australian-financial-planning-industry-paper-6.docx