Independent – one word that means a lot…

Prepared by Catherine Evans & Peter Hagias

Words such as “independent”, “impartial” and “unbiased” can’t be used by financial services firms unless certain requirements are met.  These requirements are pretty hard to satisfy for many firms. There has been some uncertainty in the past about the ability to use similar phrases such as “independently owned” or “non-aligned”.

ASIC has recently clarified its position on the ability for financial services businesses to use the phrase “independently owned” saying that terms such as “independently-owned”, “non-aligned” and “non-institutionally owned” are also restricted.

Essentially, you can only use these phrases if your business does not receive commissions, volume based benefits or any other gifts or benefits from product issuers that could influence you and does not have any conflicts of interest with product issuers.  It’s the “other gifts or benefits” bit that may catch some firms out, even if you don’t receive commissions.  This requirement would catch referral and other fees paid by product issuers such as banks.

Word of warning for Limited AFSLs

 In our experience, many accounting firms have obtained a Limited AFSL so they can fiercely protect their independence. If you want to say you are independent, you need to do a thorough audit of any incentive arrangements you have with product issuers and make changes where required. A couple to watch are referral fees from banks for LRBA loans or incentives you may receive from wholesale property syndicators you may refer clients to.

Word of warning for financial advisory firms

Having a restricted approved product list (APL) is also a factor which does not allow a business to use a restricted term. It’s a grey area. Many firms have an APL for quality control and risk management purposes which is prudent. However, if it is unduly restrictive or does not allow the adviser an easy process to recommend a product that is not on the APL, this would mean you can’t use the word “independence” or related phrases.

I need to fix up my marketing collateral, quick

ASIC has provided firms with a facilitative compliance period of 6 months (beginning from 27 June 2017) so that they can change their website and documents to remove terms such as “independently-owned” and “non-aligned”. However, this compliance period is not available for the original restricted expressions, such as “independent”.

Now is the time to review and revise your website and marketing collateral.

If staking the independence claim is important to you (which we expect is a growing trend), now is the time to do an audit of all referral and other relationships and make changes where necessary.

Give us a call if you want to discuss any of this further.