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Advisers have welcomed Best Interests duty, says new research


Research released today by HUB24 Limited, conducted with over 300 Australian financial advisers, has shown the Best Interests Duty (BID) has been overwhelmingly welcomed since its introduction in 2013.

The research reveals that over four out of five believe it was necessary to raise standards across the industry and that the formal structure of the compliance regime has given advisers greater confidence that the quality of their advice has improved.
The research, conducted by CoreData and in partnership with the AFA, surveyed advisers on how they have implemented the Best Interests’ Duty regulation in their business over the past five years and how it has affected the provision of advice to their clients.
HUB24 Managing Director, Andrew Alcock, says: “At a time when there is increasing scrutiny on the quality of financial advice it’s very clear from this research that advisers are focused on meeting the best interests of their clients. In our experience, advisers have always considered a range of factors, and not just price, when selecting financial products to help deliver outcomes for their clients both now and for the future”.
Advisers who were surveyed were generally confident in their understanding of the Best Interests Duty and the implications for them as advisers, though when asked 70 per cent of all advisers say they “definitely” or “may” need additional training or information. This could reflect a clear focus from advisers wanting to make sure they do their very best in the context of a rapidly changing market and community expectations.
When asked specifically about product selection, though cost is an important factor, by far the most significant consideration for advisers was whether a product matches the client’s assessed risk tolerance, or whether the product has better or more relevant features than available alternatives. Again, when asked specifically about platforms, advisers ranked features ahead of cost as the number one reason for platform choice.
There is clearly demand from advisers for platform technology that can add value for clients through active tax management of investment portfolios. 89 per cent of advisers surveyed say they would consider it either extremely important or somewhat important if their platform could help achieve this. Whilst many platforms now provide tax management and modelling tools there are significant differences between the level of sophistication of these tools and the outcomes they can provide for clients over the long term, specifically when it comes to the ability to in-specie transfer assets and actively model client tax outcomes when selecting managed portfolio investments.
Alcock says: “Providing quality advice for clients relies on understanding their specific circumstances and also understanding how to incorporate the available products and features that can enhance client outcomes. Given the rapid pace of innovation the products we are building today are providing new opportunities for clients. As the industry evolves it is important to understand how new products and capabilities can contribute to client outcomes if our aim is to do the very best we can for them.”
The Association of Financial Advisers (AFA) CEO Phil Kewin, says: “The Best Interests Duty is arguably the most important obligation for financial advisers. We welcome this research into adviser’s views on the Best Interests Duty. We would encourage more research being done in this space and more guidance provided to financial advisers to ensure that they can be confident that they are meeting their obligations. Ultimately an increased awareness of the Best Interests Duty and related obligations will result in improved outcomes for the consumers of financial advice.”
The full recommendations from the Royal Commission into Financial Services are due to be released imminently and as a result it is possible there may be further changes to the Best Interests Duty regulations and how advisers can adhere to them.

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