If you thought you knew what an independent financial adviser was following a decision from the Advertising Standards Complaints Board (ASCB) three years ago think again.
In 1997 the board controversially ruled that Money Managers could not call itself independent because it received commissions from fund managers. Consequently, because managers pay most advisers some form of commission for selling their products the word independent was deleted from the industry's lexicon.
The board's definition of independence has stood because no-one in the industry has bothered to devise a better or more appropriate one.
Things have changed though thanks to Money Managers and the board.
Money Managers marketing director Al Scott complained to the board recently about an advertisement run in the New Zealand Herald by Financial Vision.
In the ad, and on its website, Financial Vision described itself as independent. Also, it said on its website that under its standard charging option the company is able to receive "any brokerage that is payable from the placement of any insurance or investments."
Scott concluded that this description was in breach of the earlier board decision.
Financial Vision argued because it used Sovereign's Aegis Portfolio Monitoring system, and charged monitoring fees on a purely fees basis it was in fact independent.
The board agreed saying that the portfolio monitoring service, "which was the basis of the complaint, was performed on a purely fee basis."
It said this was clearly distinguishable from the 1997 decision, therefore Financial Vision "was quite within its rights to make use of the word independent."
In dismissing the complaint the board said "where the advertiser can confirm there were no commissions, trailing commissions, soft dollar arrangements or benefits from product providers, which may tend to create a product bias then the use of the word independent was, in the board's view, permissible in financial advertising."
The board did however "emphasise that its use was strictly limited to those particular occasions where absolutely no remuneration was received from the fund manager for the service."
Besides defending itself Financial Vision, in its submission, also took a shot at the board saying its previous decision set a "stupid standard".
"We strongly disagree with the board's ruling on the use of the word independent. The word has a clear meaning in English and in effect, the board is prescribing a new and inaccurate definition of the word without good reason.
"It seems to us that a standard which purports to prevent me describing myself as independent when I am in fact independent...is a stupid standard which we would like to see changed," Financial Vision said.
Independence is a hot issue.
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