"The institutions don't want to be in the advice business," Hewison Private Wealth founder, John Hewison, says. "There's no money in it."
Well, there must be money in it, otherwise Hewison wouldn't run a business himself, but his point is one you hear repeated every so often. The reason AMP, the big banks and IOOF pay the salaries of thousands of financial advisers is because they're a sales force for products. That's the logic some people apply to the industry.
If it's true, then the terrible examples of advisers employed by major institutions serving themselves before their clients can only be explained as corrupt human behaviour, plain and simple. It doesn't make sense as a business model.
A minority of advisers have let the system down, though, and the public may be tempted to blame the brands behind those advisers. How can the big players ever get themselves out of that tangle?
"I suspect the instos [institutions] will find a way of setting up their advice businesses as independents," Hewison says, as though it's a solution. OK, but how? "I don't know, but I bet those discussions are going on."
To make an insto look like an independent would be "very, very difficult," says Steve Tucker, the former MLC chief executive who set up independent licence Koda Capital last year.
What they can do, he says – and they'll continue to do – is put processes in place to make sure the client's interests come first, so the client "is put ahead of the institution".
"The challenge is that, structurally, you're always dealing with a vertically integrated system [where the adviser is paid by a product-maker]," Tucker says. "It's very difficult to escape the fact that inside a vertically integrated model there is a structural conflict."
The only ways clients can be guaranteed complete independence is with a structure that ensures separation of advice and product, Collins House managing director, Dominic Alafaci, says. "You really can't have any financial products of your own," he says.
If the institutions aren't independent, then they wouldn't be silly enough to claim they are. So Hewison's neat conundrum for them will remain unsolved. Instead, the instos' model can endure as long as it is armed with tiny snares laid to capture any errant advice that benefits the adviser more than the client.
That's all good when everything's travelling along nicely. But it's humans who deal out bad advice, motivated by funnelling more revenue into their practice or home renovation or wardrobe or whatever.
"Where poor advice is given inside a vertically integrated model, it shouldn't always be assumed that's because the organisation has forced that to happen," Tucker says.
The focus is on advisers. It always has been.
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