ASIC adopts a strict position when it comes to the use of certain words and expressions relating to the independence of financial advisers pursuant to the Corporations Act 2001 (the Act).
According to section 923A of the Corporations Act 2001 (the Act) financial service providers (both the AFSL and Advisers) can only use the restricted words ‘independent’, ‘impartial’ and ‘unbiased’ if and only if they do not receive any commissions, volume-based payments or other gifts or benefits and operate without any conflicts of interests. Although s923A only specifically addresses the words ‘independent’, ‘impartial’ and ‘unbiased’ as restricted words, in recent times its scope has been expanded by ASIC so as to also include phraseology such as ‘independently owned’, ‘non-aligned’, ‘non-institutionally owned’ and other similar terms: see article here.
The genesis of this stems from the importance of ensuring that the independence of financial advisers or planners does not influence clients’ decisions about their investments or choice of financial adviser/planner. As such, this protects clients from being misled into thinking that the financial adviser/planner is free from any influence when in actual fact, they are.
In other words, ASIC’s aim is to prevent misleading and deceptive conduct.
This is again mirrored in ASIC’s Regulatory Guide 234 (RG 234.96 (a)) which provides that a financial service provider cannot include the term “independent” in marketing materials or imply that they provide ‘independent services’ unless certain conditions are met: see RG 234.
In short, the restricted words/terms SHOULD NOT BE USED within your business including, but not limited to:
- your discussions with your client;
- file notes;
- Financial Services Guide;
- Statement of Advice;
- Record of Advice;
- Fee Disclosure Statement and Renewal Notice; and/or
- Any other documents that are presented to your client.
We note that some advisers do not receive any commissions from a third party or any product providers, however, you are still not allowed to use these words or market yourself by using these words as the group, i.e. Dover (the AFSL) and other advisers, receive commissions and/or other allowable benefits from any third parties or product providers.
If you would like to convey to your client that you do not receive any commissions from any third parties or product providers or do not have any obligations towards them, you may say:
- We do not have contractual obligations with any product providers and our advice or service is purely fee-for-service;
- We do not keep any commissions and any commissions received will be rebated to you; or
If you have any questions in relation to this or need assistance with the wordings, please do not hesitate to contact your compliance consultant.