Financial Planning
Vertical integration needs overhaul: Poll

As the advice industry reels from the impact of Royal Commission misconduct revelations that stemmed from vertically-integrated models, seven in ten Financial Standard readers are of the opinion these model need a revamp.

Starting May 7, we asked our readers: "Should vertical integration be re-modelled in financial institutions."

The majority (39%) came out strongly in favor of a remodeling while the cohort that agreed, but not strongly, came in a close second (32%).

Flaws in vertically integrated models were a key takeaway as Senior Counsel Assisting Rowena Orr wrapped up the Royal Commission's grilling of advice industry giants on April 30.

Orr argued that planners working from approved product lists that featured only the licensees' platform offerings were at systematic risk of failing to act in the best interest of their clients.

Separating platform operators and advice licensees would "place pressure on the platform operators to charge competitive fees and offer competitive features," she said.

Contrasting Orr's opinion, 10% percent of our poll's voters strongly disagreed that vertical integration needs a re-model while another 13% disagreed.

Two weeks into Commissioner Hayne's last hearing from the advice industry, licensees have taken some measures to move away from the traps of vertically-integrated models.

On May 7, ANZ culled sales-based bonuses for its advisers after the Royal Commission hearings revealed the bank had run a "leaderboard" that ranked advisers on the revenue they brought in.

Meanwhile, UBS believes while the Royal Commission may propose outlawing vertical integration, it is unlikely to ultimately become a law, according to its analysts in a research note dated May 4.

However, UBS is now putting a 20% probability on structural separation and is factoring it in as a tail risk in its price targets for specialty platform provider stocks.

Six percent of our voting readers were unsure which side of the fence they sat on.

This week we ask: "Must grandfathered commissions on superannuation and investment advice be phased out?"

Read more: Royal CommissionVertical integrationUBSANZFinancial Standard PollRowena Orr
Link to something GxkCqzGe