Next time a friendly bank staff insists on helping you with your money, consider this:
75% of the advice given to customers wasn’t in the clients best interests.
This startling figure comes from a recent review of the financial advice offered from the big four banks by the Australian Securities and Investment Commission (ASIC).
Even more startling: 10% of advice was found to leave investors in an even worse financial position.
Through a “vertically integrated business model”, Commonwealth Bank, National Australia Bank, Westpac, ANZ and AMP offer ‘in house’ financial advice, and collectively, control more than half of Australia’s financial planners.
It’s no surprise ASIC’s review found advisers at these banks favoured financial products that connected to their parent company, with 68% of client’s funds invested in ‘in house’ products as oppose to external products that may have been on the firms list.
Many financial commentators are calling for a separation of financial advice attached to banks, with obvious bias and failure to meet the best interests of clients becoming more apparent.
Chris Brycki, CEO of Stockspot, says “investors should receive fair and unbiased financial advice from experts who will act in the best interests of their client. What Australians currently get is product pushing from salespeople who are paid by the banks.”
Brycki is calling for structural reform to fix the problems caused by the dominant market power of the banks to ensure that consumers are protected, advisers are better educated and incentives are aligned.
Stockspot’s annual research into high-fee-charging funds shows thousands of customers of banks are being recommended bank aligned investment products despite the potential of more appropriate alternatives being available.