Independent Financial Advice
Why Independent Financial Advice?
Given the issues that the financial planning industry has faced with royal commissions, conflicts of interest and general self-interest we believe that in order to move from an industry to a profession that advice providers need to hold themselves to a higher standard than the minimum standards within legislation. One way that we believe this can be met is through becoming an Independent Financial Advisor.
The use of the word ‘independent’ is enshrined within the Corporations Act and says that financial advisers can only use this term if they meet the following standards:
- Must not receive commissions from a product issuer.
- Must not charge forms of remuneration calculated on the volume of business (a legal way of saying don’t charge percentage based fees).
- Must not accept gifts from a product issuer that might influence them.
- Must not have any additional product restrictions imposed on them by their AFSL (another legal way of saying you can’t have arestricted list of investments that you advise on).
- Must not have any association with either a financial product or a financial product issuer.
To give you some context, at the time of writing, there are approximately 20,000 financial advisers in Australia which Super Guide have estimated 92 or under 0.50% are classified as independent financial advisers.
What’s more, in order to satisfy the rules, an adviser must also be able to make the same declaration about their AFSL holder, plus, the same declaration for every single other adviser licensed by his or her Licensee.
Together, these rules around the use of the word Independent Financial Adviser we believe, entitle the public to a higher level of confidence that their adviser is free from conflicts of interest (including hidden ones) that might impact their advice or impartiality.