First Super, a $1.9 billion industry superannuation fund has warned its members over seeing financial planners not aligned with the fund.
Co-chairmen, Michael O'Connor and Allan Stewart have suggested that bank-aligned financial planners do not put the interests of their clients first – despite laws requiring them to do so.
Mr O'Connor and Mr Stewart have written to members saying, "One issue that most concerns is the market presence of financial planners who advise people to invest in superannuation and retirement products that are more expensive – and potentially less beneficial – than ours." They add, "If you're offered a session with a financial planner by your bank or other financial institution, be mindful of their possible motivations and payment structures."
All of the big four banks have significant funds management businesses. As an example, Commonwealth Bank (ASX: CBA) owns Colonial First State, one of Australia's largest fund managers, while Westpac Banking Corporation (ASX: WBC) has a significant stake (69%) in BT Investment Management (ASX: BTT).
BT reported in its annual report that it works closely with Westpac's Private Banking division, and received "strong support to exceed its Funds under management (FUM) targets for the year". While I'm not suggesting any impropriety here, there remains a potential conflict of interest for Westpac financial planners to recommend BT investment products.
While not a big-four bank, AMP (ASX: AMP) has both a substantial financial planner network as well as a large funds management business, with more than $135 billion in FUM, and there could be overt or subliminal incentives for AMP planners to push investors into AMP-related products.
The previous federal government recognised that there could be conflicts of interest here and had implemented new rules to pare back certain payments to financial advisers and require them to act in the best interests of their clients. However, the Coalition has signalled that it plans to overhaul some of the changes, which could potentially see billions in fees flow to financial planners and their parent companies.
Foolish takeaway
The Motley Fool has argued strongly that investors deserve to receive conflict-free advice from financial advisers. It appears that we are not alone.
