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HIDDEN commissions, fees for no service, conflicts of interest – the picture emerging from the Royal Commission into banking, superannuation and financial services isn’t pretty. Above all, the hearings into misconduct in the industry have highlighted the need for independent advice. But finding an adviser who is truly “independent” can be harder than it looks.
Scott Stanley, the managing director of Richmond Private Wealth, says an independent adviser is free from all outside influence. “In our industry, this translates into being independent of the companies that issue financial products, which are the banks, superannuation funds, life insurance companies, managed funds and the like,” he says.
Part of the problem is that, although all advisers are required to be authorised through an Australian Financial Services Licence (AFSL), only a minority hold an AFSL in their own right. Many are licensed via a bank, bank subsidiary or other large institution.
“If the licence holder has financial products to sell, then it is not permitted for the individual adviser to call themselves independent,” explains Stanley.
He says an independent adviser should recommend simply what they believe is best suited to their client’s needs, without restriction. “But if you are licensed through an institution, then it’s likely the list of superannuation and investment products you are able to recommend to clients will be tilted towards products issued by that institution.”
Stanley says there are some simple steps an investor can take to find an independent adviser.
The Australian Securities and Investments Commission does not provide a register of independent advisers, but there is one available on a well-respected private website, superguide.com.au.
“Superguide lists only 124 independent advisers around Australia, so they can be hard to find,” says Stanley. Ultimately, consumers need to ask any potential adviser some searching questions, including what financial institutions they are affiliated with (including ownership links), what they have on their Approved Product List and also how they are paid.
“Brad Martyn, our chairman, and I have nearly four decades of experience running our own AFSL,” says Stanley.
“Being independent, we do not have any restrictions on the investments we are able to recommend.”
At Richmond, clients pay an annual fee for service based on the complexity and level of work required. The scope of the work and the service fees are clearly set out in writing for clients to review. Nothing is hidden. “And we don’t accept any form of commission or other benefits that could conflict our advice,” he says. “Each year we re-engage with our clients for the next 12 months. To survive we must provide top-quality, professional advice. If clients don’t sign on with us again, we have no business.”
Stanley says Richmond’s advisers have serviced many clients for decades and are now helping the next generation. “If you deal with a large institution, adviser continuity is not the norm,” he says. “But for our clients, continuity is very important. They always know who they are dealing with.”
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