With Westpac announcing this month that it will be slashing 900 jobs in a drastic movement away from financial advice, it appears that the effects of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry will be felt for some time to come. In the wake of the Royal Commission, the Financial Adviser Standards and Ethics Authority (FASEA) have initiated an overhaul of the financial planning focused on raising the education standards and implementing a strict new code of ethics for financial planners in Australia. “The registering of the Code of Ethics represents a significant milestone in providing a framework to lift the ethical and professional standards of financial advisers,” said FASEA chief executive Stephen Glenfield.
The implementation of FASEA’s new code of ethics stands to benefit thousands of Australians seeking and receiving financial advice. However, there has been a small group of planners working to a higher standard for years, the standard of independence.
In Australia there are approximately 25,000 non-independent advisers compared to the much more humble figure of just 128 independent advisers and you can see that independence is a rare but important attribute for investors to consider.
But what does it take for a firm to be classified as independent and why is it an important consideration when seeking financial advice?
‘Independent’ is a controlled term under the Corporations Law and according to the Corporations Act section 923A, to be able to claim ‘independence’ as a financial adviser one must meet a rigorous set of standards including not having received any commissions or gifts from, or have any association whatsoever with a financial product or product provider. The term ‘financial product’ includes things like insurance and superannuation and ‘product provider’ refers to banks and other financial institutions.
In meeting the standards set by Corporations Law, a financial planner can confidently say that they have only the client’s best interests to adhere to. This is good news for any client looking to receive unbiased advice, as any incentive, whether it be commissions from product providers or asset fees, can easily become a conflict of interest for a planner.
Essentially, independence translates to trustworthiness, an invaluable asset when dealing with your money and future.
If you’re seeking 100% independent advice, contact us for a free initial consultation.