There are many financial advisory firms that claim to be ‘independently owned’, but this does not mean they are truly independent. We satisfy the Corporation Act’s definition of independent(s.923A) because we do not receive any commissions, we do not charge fees based on volume of product sold or advised on and we have no affiliation with any product manufacturer that could lead to a conflict of interest or a perceived conflict of interest.
The only fees we receive are directly from our clients which means we work only for them. We rebate all commissions on insurance products.
The Legal Definition of an Independent Financial Advisor / Planner
The Law states that financial advisers can only call themselves “independent”, “unbiased” or “impartial” if they (and their associates) do not receive any of the following:
- commissions (apart from commissions that are rebated in full to the person’s clients)
- forms of remuneration calculated on the basis of the volume of business placed by the person with an issuer of a financial product
- other gifts or benefits from an issuer of a financial product which may reasonably be expected to influence the person.
The source of the rule is section 923A of the Corporations Act 2001 can be viewed by clicking here or the link below :
Australian Securities and Investments Commission’s (ASIC’s) view on rebating
ASIC’s view on rebating is also quite restrictive. ASIC considers that the requirement that commissions are ‘rebated in full’ is satisfied if, as soon as the commission is received, it is rebated to the client without delay by:
- rebating an amount equivalent to the commission directly to the client by cash, cheque or other direct means (eg by direct credit to a bank account nominated by the client); or
- offsetting any debt owed by the client (i.e. a debt owed before the commission was received by the licensee) by an amount equivalent to the commission, except in circumstances where the amount of the debt is calculated by reference to commissions expected to be received by the licensee.
ASIC does not consider that the requirement that commissions are ‘rebated in full’ is satisfied if a client’s account with the licensee is credited with the amount of commission received, where funds in the client’s account may be used to meet future liabilities of the client to the licensee and the client does not have the right to demand payment to it. This is because the rebate is not immediately available to the client in these circumstances.
(Source ASIC QFS38 Published 10/12/2002; Revised 25/11/2003)