The Association of Independently Owned Financial Planners (AIOFP) will seek to convince its largest dealer groups to introduce stricter standards for approved product lists (APL) after the damage inflicted on some members by the collapse of product providers including Trio Capital.
The association has organised a meeting with around 10 members, believed to include Australian Financial Services (AFS), Wealthsure, Madison Financial Group, Patron, and Risk and Investment Advisors Australia (RIAA).
RIAA chief executive Les Mace confirmed the meeting would be held a day before the AIOFP's biannual conference on the Gold Coast in September.
"It's a good thing for the industry. The meeting will be about improving the quality of the research and better sharing of information across various businesses within the AIOFP," Mace said.
Madison managing director Tony Hartley said he applauded the AIOFP's efforts to strengthen the APLs of licensee members and reduce the opportunity for bad product providers to gain access to recommended lists.
"I applaud every licensee who does this because fundamentally that's one of our responsibilities as an Australian financial services licence [holder]," Hartley said.
AIOFP executive director Peter Johnston said the meeting was about ensuring second-tier product providers did not reach its members' APLs.
"We are sick of the tail wagging the dog and we are sick of advisers putting pressure on principals to put stuff on recommended lists because they have been influenced by other things, such as business development managers offering trips and all that type of stuff," Johnston said.
"So basically what we are doing is trying to get all our members to agree that they have a very strict APL because this open architecture [model] of where advisers can do what they like clearly hasn't worked."
AIOFP members, including Seagrims and Tarrants, have been caught out by the collapse of Trio Capital.
"At the end of the day it's totally up to the dealer principals what they have on their APLs," Johnston said.
"All we're suggesting is this term 'open architecture' is dangerous and it lulls the adviser into the frame of mind that they can do what they like and we think that's wrong for the industry and wrong for consumers."
He said he was not expecting resistance to the proposal from AIOFP members.
"I have spoken to most of them [the members] and they all theoretically agree with it, but they need everyone to row the boat in the same direction," he said.
"We are hoping to persuade them to ditch the open architecture concept and go for a small, tight, quality APL."
He said several options would be put forward to members at the meeting on how to tighten APLs, including proposing that each member appoint an independent asset consultant or use the AIOFP's filtered research committee service.
"Product failure has affected just about everyone in the marketplace, so it is all about risk management and it is also about doing the best thing by the client," he said.
"This is why we're putting these measures in place, like always having the APL constructed outside the business, because it therefore eliminates any conflicts of interest of doing things which are not in the best interests of clients.
"If this fatally flawed open architecture culture can be eliminated from the market, inferior product providers will be eliminated and rogue advisers will have to conform. This can only be good for the industry and its image with consumers and the regulator."
