Australia's financial services regulator is ASIC. (The New Zealand equivalent is the Financial Markets Authority (FMA).) ASIC recently released a report on how large financial institutions manage conflicts of interest with respect to financial advice.
In other words, ASIC was looking at financial advice provided to clients where the financial adviser was affiliated with the product issuer.
I know for a fact that there are many good advisers who operate in this type of environment. However, there are strong incentives for financial advisers in this situation to prioritise acting as salespeople rather than advisers. (While still charging a handsome fee for the privilege of providing this "advice".)
Consider the following excerpt from ASIC's media release:
in 75% of the advice files reviewed the advisers did not demonstrate compliance with the duty to act in the best interests of their clients. Further, 10% of the advice reviewed was likely to leave the customer in a significantly worse financial position. ASIC will ensure that appropriate customer remediation takes place.
Let me reiterate. Where an adviser recommended an "in-house" product to a client:
- In 75% of the advice sampled, the advice was not clearly in the best interests of the client.
- In 10% of cases, the advice was likely to put the client in a significantly worse financial position.
Through Fairhaven Wealth I follow the "family and friends rule". Which is to say, I provide my clients with the same advice I would give my family and friends if they were in the same position.
To my family and friends I'd say this. If your financial adviser is affiliated with a financial product provider, how can you know whether you're getting advice or a sales spiel?
To my family and friends I'd say this. Use an independent financial adviser.