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Independent advice

The term "independent advice" was used widely throughout the 1980s and 1990s to refer to advice given by financial planners who were not tied to any particular insurance company or other institution that sold investments. However, these days legislation prohibits any financial planner who receives commission from calling themselves "independent".

Likewise, words such as unbiased, impartial and other similar words may not be used - even if the financial planner charges a fee for services and rebates 100% of any commission for placing an investment any trail commission will prevent the financial planner from using words such as independent.

Despite many repeated requests from the BFPPG (and the FPA) to ASIC and the Government to amend this unrealistic and overly-restrictive legal definition of the term "independent" there is no will to do so. The following is an extract from the BFPPG Constitution:

For BFPPG Ordinary membership purposes, the term independent shall have the meaning as conferred by the commonly understood meaning of the term, as defined in the Oxford and Collins English dictionaries:

  1. free from outside control or influence (Oxford)
  2. not connected with another; separate (Oxford)
  3. free from control in action, judgement, etc; autonomous (Collins)
The implications are that to be independent means that the member:
  1. is not subject to influence with respect to their Approved Product List (or equivalent) from any investment product provider, or other external source
  2. has unfettered freedom of choice with respect to their ability to choose from the full spectrum of investment products, securities and services, which is allowed under their Licence
  3. is not subject to Conflicts of Interest which would prejudice the Member's ability to provide advice which is in the best interest of the client.
For BFPPG Ordinary membership purposes, independently-owned means that the Licensee business is "non-aligned" and is majority owned by financial planning practitioners, employees of the business or their associated entities ie the business is not majority owned or otherwise controlled by any bank, life office or fund manager. Where there is part ownership by any external entity or person, the member must be able to comply with the provisions of 2B(c)(iv) (v) and (vi) in the above definition of "independent".

The practical effects of the continuing refusal by the regulators to remove or amend 'independent' has been to give a huge free kick to the Banks, Insurance Companies and other large Institutions whose main interest in running one or more planning arms is to sell their investment products. Many of these financial planning businesses barely break even; we believe some are run at a loss. They exist for the primary purpose of selling the parent company's investment products, an it is elsewhere within the broader group that the profit are made.

Consumers overwhelmingly want impartial advice, tailored to their personal needs. The BFPPG believes they are far more likely to find this with an independently-owned AFSL, with no ownership ties to a product manufacturer. Yet the small group of independently-owned AFSLs is prevented by law from advertising its main competitive advantage. There have even been threats from time to time to prevent this group from using the term "independently-owned".

Did you know that around 80% of financial planning Representatives or Authorised Representatives, are licensed directly to a product manufacturer, or indirectly via licencing to an AFSL firm fully owned by a product manufacturer?

Why choose an independently owned financial planner?

Independently owned financial planning businesses are typically owned by the people who operate them. They are therefore free to recommend what they believe is right for you. The alternative is a bit like going to a Holden dealer for advice; most likely the dealer will recommend a Holden.

Finding an independently owned financial planner is not always easy because many banks and insurance companies now own financial planning companies, but these companies often do not trade under the name of the bank or insurance company; rather they trade under others names which may give consumers the impression that they are independently-owned.

For example, the following companies are all owned by banks or insurance companies:

  • Millenium3 Financial Planning
  • Garvan Financial Planning
  • Charter Financial Planning
  • Financial Wisdom
  • Securitor
  • Genesys
  • Hillross Financial Services
  • Retireinvest
  • Financial Services Partners
  • Godfrey Pembroke Financial Services
  • Industry Fund Services
  • Magnitude Financial Planning

In contrast, all members of the BFPPG are independently owned, small businesses, that have no more than 15 financial planners.

If you would like to find an independently owned financial planner in your area please download the BFPPG membership list BFPPG membership list. In addition, for your convenience links to member websites are provided on the "Links" page of this website.

The basic rules of financial literacy

  • If it looks too good to be true it probably is.
  • If you don't understand it, don't buy it.
  • Don't put too many eggs in the one basket.
  • Don't mortgage your house unless you are prepared to lose it.
  • Goldilocks test - make sure it is "just right" for you.
  • If you are not 100% confident then seek a second opinion from someone who is qualified, experienced, and not paid to sell you a specific product.

"It is difficult to get a man to understand something when his salary depends upon his not understanding it."
by Upton Sinclair and referred to by Al Gore in an Inconvenient Truth