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National Australia Bank (NAB) today welcomed the results of ASIC's shadow shopping survey which reflect the improvement in the overall quality of advice being experienced by customers while highlighting some important areas for further improvement.
"We believe all Australians will benefit from having access to a trusted financial planning system that provides quality advice," said Ahmed Fahour, NAB's CEO Australia.
"This latest survey highlights the need for organisations that both manufacture products and provide advice to be diligent in ensuring no bias or conflicts exist that can reduce the quality of customer outcomes.
"This is critical if we are to continue to build the community's trust in the financial planning profession - we need to listen to the community's concerns and feedback and respond accordingly."
CEO of MLC, Mr Steve Tucker said that while transparency and disclosure go some of the way in addressing these issues, the industry needs to do more.
"Transparency and disclosure are not always enough - the industry also needs to be looking at what practices need to change or be eliminated altogether," Mr Tucker said.
"Over the past few years we have systematically removed bias and conflicts from our business model including:
Changes at a Product level:
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Fee for service versions of MasterKey and MasterKey Custom with no commissions built into the platforms;
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Separation of product and advice fees in PDS and promotional material for MasterKey and MasterKey Custom;
Changes at a Licensee level:
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The removal of bias in licensee splits for Godfrey Pembroke, Garvan, Apogee and MLC Financial Planning, which removes incentive to sell MLC product over other products on the recommended lists;
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The removal of preferential pricing for the sale of in-house products or platforms in National Australia Financial Planning;
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Establishing a separate governance board for the Australian Financial Services Licensees;
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Introduction of Advice Pay - a custom online fee collection system which enables both direct debit and credit card transactions online, further supporting advisers in their transition to a fee for service pricing model.
"We also have a critical focus on compliance, training and practice management including a Quality Advice Accreditation program," Mr Tucker said.
"As an industry, our challenge is to improve the clarity and transparency of payment and remuneration practices in financial planning and progress client understanding,"
In February 2006, MLC launched a fee for service version of its MasterKey platform which does not pay commissions, allowing financial advisers to charge a separate Adviser Service Fee.
"More than 30% of MLC's business during 2005 came from advisers using a fee for service model and we believe this number will rapidly increase during the next few years to between 70-80% of advisers," Mr Tucker said.
"There will always be some clients who want to pay for advice via commissions and others who would prefer to pay a separate fee. What's important is ensuring advisers have the tools to be able to offer clients choice and flexibility."
Mr Tucker also welcomed the report's focus on the role of licensees in addressing conflicts of interest and ensuring their representatives comply with the law.
"It is critical that licensees take their training and monitoring responsibilities of their financial advisers very seriously to uphold quality standards of advice and move quickly to address detected breaches."
"We support ASIC's continued focus on changing and improving the Financial Services Reform Act particularly in the areas of Statements of Advice (SOA) and providing clarity around general versus personal advice and initial versus ongoing advice."
"Along with the FPA, we welcome ASIC's decision to review the obligation to give a SOA where an adviser makes a hold recommendation."
"ASIC's shadow shopping surveys are a valuable tool for the regulator and the industry to assess progress towards our mutual goal of achieving a trusted financial planning system that provides quality advice."
For further information, please contact:
Stacey Mitchell
Corp Affairs Manager, MLC
National Australia Bank Limited
T (02) 9966 3035
M 0400 305 446
Geoff Lynch
Head of Media Relations, NAB
T (03) 8634 1564
M 0405 319 819
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