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Financial Happenings Blog
Wednesday, January 11 2012
More and more Australians are seeking out independent financial advice.  The key reason for doing so is to have some level of comfort that the advice that is being received is actually given to benefit you rather than your adviser (and his or her backer).

Unfortunately it seems that it consumers find it difficult to actually determine the independence of the adviser.  The latest Roy Morgan Research - Superannuation and Wealth Management in Australia - points out that many consumers even though they know a firm is owned by a major financial institution, such as the big four banks and AMP, believe that the advice they will receive is independent of any bias.

The report goes on to show that this is not the case with the following key findings:

  • 70% of products recommended by advisers working for an institutionally-owned licensee were provided by the parent company.
  • AMP planners were the most likely to recommend their own products, with 78.9% of their members directed into AMP managed products, followed by CBA/Colonial at 76.3% (in the 12 months to June 2011).
  • At the opposite end of the spectrum, only 41.5% of ANZ/OnePath advised customers were sold the group's products.
  • It was recognised in the report that these products may contain some funds managed externally.
For me, if you go to an adviser with links to a major financial institution, and 70% of the products recommended to you on average are products that are provided by the financial institution some alarm bells must be going off as to the independence of the advice.

The advice may be sound and the products recommended might just be the very best for you in your situation but some doubt must linger.  It is important to be going in to discussions with your eyes wide open and ask the tough questions.

So what big questions should you be asking?

1) Is the firm owned by another major institution?
2) Are there extra financial or promotion incentives for the adviser to recommend products from that financial institution?
3) Is the adviser limited to using certain products and if so why?
4) What is the underlying investment philosophy on which the product choices have been made?

A Clear Direction openly encourages consumers to find financial advice that is independent of what we refer to as "ownership bias".  If you want to find out more please get in contact.


Posted by: AT 09:01 am   |  Permalink   |  Email
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