Financial Planning
AFA rebukes ideological drive against conflicted remuneration

The Association of Financial Advisers came out swinging in a public response to the Royal Commission's final report this morning.

Speaking at the Sydney leg of the association's annual Connect Tour, AFA general manager of policy and professionalism Phil Anderson lashed significant sections of Kenneth Hayne's final report, taking the Commissioner to task over his perception of various aspects of the advice sector in the process.

Referring to Hayne's recommendation that an ASIC review of the measures to improve the quality of advice also consider exemptions to the ban on conflicted remuneration for non-monetary benefits, Anderson questioned the necessity of stopping advisers receiving education from product providers.

"Why is that such a high priority?" Anderson asked.

"Where is the danger in having product providers pay for you to attend educational events? To me that just seems to be taking it to an obsession.

"Removing every possible conflict seems unnecessary. And it's not going to be in the best interests of your clients if you have reduced access to top training and education."

Speaking about Hayne's "strong bias" to have life insurance commissions removed from the industry, Anderson also questioned the Commissioner's motives.

"And this is in large-part drawn from his ideological determination to remove all conflicted rem (remuneration)," he said.

"[This is] despite the fact that there is no international evidence to suggest that a model of that form would actually succeed.

"And the underlying reality that many clients would no longer have access to life insurance advice if they were expected to pay upfront for life insurance advice."

The AFA policy head also took exception to the Royal Commission's use of the term "intermediaries" when referring to financial advisers, and said advisers were not product distributors.

"And clearly the view of the Royal Commission is that financial advisers are intermediaries," he said.

"But I would say I object to that, because I believe the primary service provided by financial advisers is financial advice. That is what you're here to provide.

"I think the recommendation of product is secondary, it's part of what you do. But you are primarily here to service your clients and provide advice."

However for Hayne, the fact that product recommendations are an adviser's secondary role does not appear to be enough. On the second page of his report, the Commissioner noted the opposed interests of product providers, intermediaries and clients, and said their separate interests couldn't all be served by one person.

"An intermediary who seeks to 'stand in more than one canoe' cannot," according to Hayne.

"Duty (to client) and (self) interest pull in opposite directions.

"But experience shows that conflicts between duty and interest can seldom be managed; self-interest will almost always trump duty."

In opening his address to tour delegates this morning, Anderson said he knew the Royal Commission wouldn't be fun from its beginning.

"December 2017: First of all we had the formalisation of the Royal Commission," he said.

"And I knew from the outset that was not going to be a lot of fun. And then we also had FASEA drop their first bombshell when they set the pathway for their education standard. A graduate diploma with very little mechanism for any recognition of prior learning

"We've basically been in a war zone ever since."

Read more: Royal CommissionAFACommissionerAssociation of Financial AdvisersKenneth HaynePhil AndersonFASEA
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