Four ways conflicts of interest can arise

Alex Burke,  Senior Writer,  No More Practice Education

Conflicts of interest in financial advice are often framed in terms of deliberate misconduct or “bad apples”.

This isn’t always the case, though. Speaking at the 2018 Financial Planning Association Congress, Australian Financial Complaints Authority lead ombudsman – investment, advice and superannuation June Smith said that conflict often arises unintentionally. Which is a problem because, as a recent Royal Commission research report by Professor Sunita Sah explains, “conflicted advisers consistently give poor-quality advice.”

To illustrate how conflict can emerge despite one’s best intentions, she highlighted four examples:

 

The fee for no service

In the first case study, Smith recalled an advice business which had an opt-in fee which was charged to a client automatically. The fee itself was initially approved by the client, but due to a systems error the fee was charged in such a way that it had a tangible effect on the client’s portfolio.

“You have to wonder,” Smith asked, “what should

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18 September, 2018

Alex Burke,Senior Writer,No More Practice Education

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