Imagine you’re seriously ill and seeking treatment. Medical science offers a highly effective cure for your condition. Yet your doctor prescribes a different medication – one that works, but not as effectively as the best available option.
The natural question arises: Why would any doctor recommend a less effective treatment? Let’s explore what could drive such a decision.
In the most obvious case, your doctor might work directly for the pharmaceutical company manufacturing the prescribed drug. Here, the conflict of interest is clear. But what if this connection was subtle, leaving you to believe you’re receiving unbiased medical advice from an independent medical practitioner?
Consider an even more subtle conflict. Imagine the pharmaceutical companies pay your doctor commissions when they issue prescriptions. More concerning still – what if the commission rates varied between drugs? How could you trust that your treatment plan prioritised your health over the financial interests of your doctor?
Conflicts in Finance
While doctors operate under a strict ethical code that prevents such conflicts, the financial advice industry has grappled with exactly these kinds of problems.
The Hayne Royal Commission exposed how conflicts of interest, deeply embedded in remuneration structures and ownership arrangements, meant Australians seeking independent financial advice often received little more than a product sales pitch.
The Corporations Act has long included a strict test of independence. This test prohibits advice firms using the terms ‘independent’, ‘impartial’ or ‘unbiased’ if they receive commissions or maintain ties with financial product manufacturers. Yet most financial advisers still cannot meet these requirements.
Since the Hayne inquiry, a Code of Ethics has raised the bar for the advice profession, demanding higher standards of competence, honesty, fairness and diligence.
However, much of the financial services industry remains product-centric. Despite bans on certain conflicted remuneration and the separation of many product manufacturers from “advice” businesses, the industry struggles to break free from its product-sales heritage.
The Benefits of True Independence
As one of the first independent financial advisers in Brisbane – and one of only about 30 across Australia at the time – I was fortunate to work with other advisers who forged a path beyond the simple definition of independence in the Corporations Act.
Many of these early adopters are now at Minchin Moore.
Well before the rest of the industry, these early independent advisers championed practices the rest of the industry actively resisted. This is important for you because when an advice business truly puts clients first, its focus naturally shifts from product-pushing to holistic planning.
Consider the contrast between a doctor who merely prescribes medication and one who promotes overall wellness through stress management, exercise, diet and preventative care.
Similarly, while product-focused financial advisers might limit themselves to insurance, investment, and superannuation recommendations, holistic advisers recognise that financial success interweaves with career trajectory, family responsibilities, health considerations, living circumstances, personal values and broader life aspirations.
A more comprehensive approach to advice acknowledges this fact: True financial wellbeing extends far beyond product selection, embracing the full complexity of peoples’ lives.
