I wish they were televising this. It would have great ratings (OK, maybe not). I've been following the banking royal commission closely with live blogs and it has more drama and intrigue than MKR and Celebrity survivor combined!
AMP management have been in the hot seat being grilled and have admitted to lying to the regulator ASIC - Twenty times. Honestly, you couldn’t make this stuff up. But most of the 'revelations' have been well known in the industry for years. They offer to buy any AMP financial planning practice as a 'buyer of last resort' at a price which is often above market rates. Keeps it all in the family. This is the problem with 'vertical integration'. The product provider (which MAY be a good product) own the license which licenses the distribution (adviser). Most dealer groups (which hold the license) lose money but rely on them for DISTRIBUTION. That is why banks own so many dealer groups.
If an adviser retires or sells back to the dealer group, the clients become 'orphan' clients until they are assigned to another adviser. The small problem however, is that adviser fees are still being paid and these are the "fees for no advice" that have been in the news.
AMP are not alone here – most banks rely on this vertical integration. Even we were approached a few years ago by a major bank wanting to buy us out! They made a VERY attractive offer which we turned down as we (and most of our clients) value choice and not being owned by a bank. I didn’t want to spend the next few years being told what to recommend for my clients.
This issue could have been fixed by the pollies a few years ago by individually licensing advisors instead of through a 'dealer group'. In fact, the Parliamentary Joint Committee into Financial Services considered this in 2014 but it was considered "not justified" on a costs basis. The committee did say however, that "should the current measures fail, consideration should be given to individual licensing". I met with the Deputy Chair of the committee and provided a submission arguing against vertical integration and for individual licensing.
So as individual licensing isn't an option, we decided to obtain our OWN dealer group and OWN license (at considerable initial and ongoing compliance expense). We did this in order to avoid the very problems that are being reported on now.
In the meantime, they should simply ban any product manufacturer, eg bank from owning a dealer group or financial planning business. We wouldn't put up with a pharmaceutical company licensing the doctor or owning the business.
Problem solved. But then again, that would be too easy.