Independent

In Australia, less than 1% of financial advisers can call themselves independent.  Use of the term “independent” is restricted by the Corporations Act and means that an adviser doesn’t have their own products to sell and doesn’t receive any commissions or volume based payments.

In Australia, there are around 18,000 financial advisers.  Yet some statistics in recent years are that:

• 85% of advisers work for product providers (Ripoll Report 2009)
• 73% of the time they recommend their own products (Roy Morgan Research 2011)
• 3% of financial plans only were rated “Good” by ASIC (ASIC March 2012)
• 1% of financial advisers elect not to receive commission on insurance products (ASIC 2014)

In order to give financial advice in Australia, you need to have a licence from the Australian Securities and Investments Commission (ASIC).  Most advisers lack the skills or knowledge to obtain a licence themselves and so they align themselves with a bank or other financial institution that already has a licence.  Unfortunately, in doing so, they have taken the easy option but sacrificed their independence.  They give over control to the bank to decide which investments they are allowed to recommend.

With regards to insurance, only 1% of advisers elect not to receive commission on insurance.  This means that 99% of advisers are taking commissions and when an adviser takes a commission, the premiums paid for that insurance are significantly higher.  Furthermore, an adviser receiving commission has an incentive to sell insurance even when it is not needed.

At Aspire Financial Consulting, we have not taken the easy path.  Instead, we have applied for our own licence from ASIC because being independent is important to us.  If we were the ones getting advice, we would want to know our adviser was independent.