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"It is really great to discover that there are some gems in the industry with great ethics who can guide you and give you great advice. Thanks Justin for your blogs and time with me".

“There is inherently a conflict between manufacturing a product and supplying a product but then having an advice network or advisers who are supposed to be providing advice in the best interests of the clients.”

Former ASIC Deputy Chairman Peter Kell.

In theory, it’s possible to manage the fundamental conflicts at the heart of vertically integrated businesses. In practice, as the Banking Royal Commission has found, the clients’ interests simply don’t seem to matter.

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With the Banking Royal Commission in full swing, there’s been a renewed focus on the separation of advice from businesses that manufacture financial products.

People are rightly concerned at the seemingly never-ending cases of poor advice given by banks who recommend the products they make and call it “financial advice”.

Former ACCC chairman Allan Fels weighed into the debate recently. “There’s just a deep conflict of interest between creating financial products and then giving independent, or so-called independent, impartial advice,” he said.

But, does removing vertical integration lead to independent advice?

Not by itself.

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Many financial advice firms promote the benefit of offering a one-stop shop, where you can get all your financial advice in one place.

These firms tout the convenience of only having to deal with one firm and they claim you will get a better overall service if your accountant, estate planner and financial adviser all work for the same company.

While there may be some benefits to this model, I think there are elements of a one-stop service that can conflict with your best interests. I think potential conflicts need to be examined and considered whenever you receive advice from a bunch of specialists all working for the same company.

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Who's Really Paying Your Financial Adviser

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Despite a series of financial planning scandals over the last few years, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has shocked the country as it uncovers extraordinary levels of dishonesty and unethical conduct.

Many people are probably wondering if they should trust anyone in the financial services industry ever again.

If you’re one of those people, I understand how you feel.

To help you make sense of what’s been uncovered, over coming weeks, I’d like to break down some of the individual stories to help you understand what happened and how you might avoid similar problems.

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Hidden Costs of Buyers Agents

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One of the biggest problems with conflicts of interest, apart from their impact, is that we simply dismiss them from our minds – particularly when they’ve been brought to our attention.

Consider the Buyer’s Agent. If you want to buy real estate, a buyer’s agent works for you to get you the property you want. Because of their objectivity and disinterest, they can negotiate without getting emotional or swept up in the moment. Because of their experience they’re able to negotiate great prices and avoid the tricks and traps set by wily real estate agents.

Buyer’s agents often promote the idea they will be able to negotiate a lower price for a property than you could.

But, to what extent is this true?

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Sustainable Investing

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Ishita Gupta

A Guest Post by Ishita Gupta, Paraplanner at Brand Financial. 

Sustainable investments lie on a green spectrum and choosing the right shade matters. The deeper the shade, the more sustainable the investment.

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Photo by Ferdinand Stöhr on Unsplash

Recently, ASIC penalised super fund Spaceship for making false and misleading statements about its GrowthX fund.

ASIC took issue with Spaceship’s claim it was actively managing the portfolio and being selective in deciding which stocks to include and which to omit, based on profitability and product differentiation.

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Sustainable investing

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For years, I have been drawn to the idea that it might be possible to maximise investment returns and maintain an acceptable level of risk and still invest in companies that share my environmental and social values.

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Photo Credit: thehareandparsnip Flickr via Compfight cc

If you read newspapers, you’re aware that the financial advice industry struggles to manage conflicts caused by ownership, targets and remuneration. Accountants, as a profession, have generally managed to avoid these conflicts by not providing financial advice to their clients. Instead, accountants refer clients to specialist advisers and mortgage brokers.

It seems like a good strategy. Is it really?

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Mortgage Bait and Switch

Did you negotiate a cheap mortgage and then wonder: what’s stopping my lender increasing the interest rate straight away?

Well, there’s nothing. And they do. Slowly.

Ever notice your lender offering new customers a cheaper interest rate than yours?

Well, that’s no accident.

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