Soft dollar hit on planners
A new report has put the spotlight on the soft-dollar benefits financial planning firms receive.
Soft dollar benefits are those other than standard commission payments.
The report, compiled by the Australian Securities and Investments Commission, reveals a wide range of soft dollar benefits being offered to individual advisers including overseas trips, share options and cash bonuses for selling particular financial products.
Financial planning firm benefits include "fee rebates", potentially worth millions of dollars each year to the larger firms.
The report contains examples of both good and poor practice.
ASIC executive director of Consumer Protection and International Greg Tanzer said the law required advisers to clearly disclose any benefits that had the potential to influence their advice to clients.
"Consumers need to know if their adviser is in a position to give impartial advice as this may affect their decision about whether to act on the advice," he said.
ASIC’s research looked at industry practice in December 2003 to March 2004 and only involved firms that had transitioned under the Financial Services Reform Act.
The commission will be requesting the firms, where disclosure may have been inadequate, to review their documents and make the necessary changes.
ASIC is also considering a formal surveillance next financial year to ensure firms are fully disclosing soft dollar benefits.
It also supports proposals by industry associations to reduce conflicts of interest and ban some types of soft dollar benefits.
A copy of the report can be downloaded from www.asic.gov.au