ASIC crackdown on use of ‘independent’

The Australian Securities and Investments Commission (ASIC) recently conducted a surveillance exercise in response to a single consumer complaint relating to use of the term ‘independent’.

As a result, the ASIC found that 17 general insurance brokers, 3 financial planners and 1 life insurance broker were misleading consumers by claiming they offered independent advice. The guilty parties have since agreed to amend their claims and remove the term independent from their statements.

For financial planners, independence can only be claimed where:

1) An independent Australian Financial Services License (AFSL) is held. In other words, the planner cannot be authorised under a license held by a product provider such as a bank, life company, super fund or managed fund.

2) Commissions of any kind cannot be accepted as payment for services. This includes incentive payments from 3rd parties.

3) Asset-based fees cannot be charged. This means fees must be charged based on the advice needed, not the amount of funds under advice.

According to Peter Kell, the ASIC commissioner, inappropriate claims of independence are now firmly on the radar and stronger action, including naming and shaming the parties involved, will be taken going forward.

Rob Ferguson from Ferguson Betts Financial Planners and Life Brokers, a privately-owned firm, said there is much confusion surrounding independent advice in the eyes of the public. We agree.

However, to avoid this confusion, you can contact the Independent Financial Advisers Association of Australia (IFAAA).

The IFAAA is a professional organisation that supports independent financial planners. Planners are eligible to join the IFAAA only if they provide independent advice.

If you are seeking independent financial advice, the IFAAA can put you in touch with an independent financial planner in your area.