The Australian Securities and Investments Commission (Asic) study looked at how these large institutions manage conflicts of interest as part of an overall review of wealth management.
Asic researchers looked at advice from ANZ Bank, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Westpac and financial services giant AMP.
The review found that, overall, 79% of the financial products on the firms’ approved products lists (APL) were external products and 21% were internal or ‘in-house’ products.
However, 68% of clients’ funds were invested in in-house products.
Although these figures varied, according to Asic, there was clear weighting among advisers towards in-house products.
“Recommendations of ‘in-house’ products may be appropriate,” the report notes. “Nonetheless, conflicts of interest are inherent in vertically integrated firms, and these firms still need to properly manage conflicts of interest in their advisory arms and ensure good quality advice.”
In a sample of 200 clients, 75% of the advice failed to demonstrate compliance with the duty to act in the best interest of clients.
In the same sample, 10% of clients were found to be significantly worse off as a result of the biased advice and Asic pledged customers would be compensated.
Following its damning findings, Asic pledged to consult on how to strengthen conflict of interest management.
