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ASIC sheds light on vertical integration probe

The corporate regulator has released details of its surveillance of vertically-integrated wealth managers, revealing it is on the lookout for mis-selling and advice failures.

In its submission to the Senate’s ‘scrutiny of financial advice’ inquiry, ASIC revealed that it has tasked two of its regulatory teams with a specific focus on vertically-integrated businesses, having announced in late 2014 that it was ramping up its surveillance of the six largest financial planning licensees.

The Investment Managers and Superannuation team will be assessing conflicts of interest in these businesses and “how those conflicts are managed”, while the Financial Advice team will be examining cases of breach reporting, financial product “mis-selling” and quality of advice provided within these organisations.

The surveillance project is in operation until June, with a subsequent report due to be released “shortly thereafter”, the submission said.

“The inherent conflict of interest created by vertical integration may not be readily apparent to clients, particularly if the product manufacturer and advice parts of the business operate under separate licences and business names,” the submission said.

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The slated register of financial advisers – which will include information about AFSL ownership and alignment “where applicable” – will help with any consumer confusion, the submission anticipates.

ASIC has also suggested that in addition to the adviser register and surveillance work, other measures may be useful in assisting consumers with their understanding of business models and conflicts of interest.

Specifically, the submission said that advisers could be required to “provide a prominent, simple statement about the relationship of the adviser to the issuer, and the limited range of products that the adviser is able to recommend, before the advice is provided”, while also re-submitting the notion of a ‘restricted label’ for intermediaries aligned to financial product providers.

ASIC sheds light on vertical integration probe
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