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 Financial Happenings Blog 
Thursday, November 12 2009

The recent takeover play by AMP for AXA has focussed attention back on to the issue of ownership bias in the financial services industry.  By this I mean where a financial planning firm or adviser / dealer group is owned or strongly supported by a major financial institution such as the big four banks / AMP / AXA and through those ownership links advisers are encouraged to promote the investment and insurance products developed by those large institutions.

 

A recent article in the Sydney Morning Herald provided details from a report that showed these financial planning groups tied to the big end of town have been allocating 73% of their sales to their own products in the past 12 months. - Financial advisers mostly a sales force, report says

 

Just this morning news has filtered through that Hillross Financial Planning (owned by AMP) have bought Rabo Financial Advisors - the financial planning arm of Rabo Bank - so you can expect that AMP products will feature more heavily on recommendations to clients going to Rabo Bank for financial advice into the future.

So it seems the move for these large institutions to grow through acquisitions and then pumping products out to clients continues with strong momentum.

 

But how do you know who is owned by whom?

 

The Association of Independently Owned Financial Planners provides a starting point on their website with their page Who owns who? But as the introduction of the page suggests, it is easy to know the links between the large adviser groups but not necessarily the smaller ones.

 

Therefore it is a really important question to be asking before going too far ahead with a particular adviser.

 

Are the big financial institution products unsatisfactory?

 

I am not saying that the products that have been developed by these large financial institutions are not going to provide a good outcome for investors and financial advice clients.  However there is some evidence to suggest care needs to be taken.  For me the problem is that you can't be sure that you are getting advice that is in your very best interests or are you just being sold a product.

 

This to me seems just as big if not bigger issue than that raised by the use of trailing commissions.

 

Regards,

Scott Keefer

Posted by: Scott Keefer AT 05:12 pm   |  Permalink   |  Email
 
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