According to David Chaplin at InvestmentNews "vertically integrated models fall to new low" as
'The Australian regulator has given institutions another incentive to slim down their wealth management operations following the release of a damning report on so-called ‘vertically-integrated’ financial advice models last week.'
The direct quote from the report of most interest is:
"the high level of non-compliant advice, combined with the high proportion of funds invested in in-house products, suggests that the advice licensees we reviewed may not be appropriately managing the conflict of interest associated with a vertically integrated business model,”
This add ammunition to the case of people such as Brent Sheather who are fierce critics of the idea that financial advice can be given by advisers working within a vertically integrated business with a limited product list. It is a useful contrast to the view advanced in recent years that commission was the emblematic conflict of interest.
In fact, conflicts exist across the industry, in different forms. A purist might argue for complete separation of advice provision from the provision of any actual financial services, and that it should be rewarded solely on an hourly paid basis from the client. A pragmatist focused on broad access to 'good enough' services for the biggest possible number of people will focus on trying to manage the conflicts - wherever, and however, they arise.
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