The Australian Investors' Association (AIA) has called for the practice of fund managers giving 'soft dollar' or non-traditional commission rewards to investment advisers to be banned.
Although financial advisers must disclose any normal commissions that they receive from fund firms to their clients, and are not permitted to describe themselves as independent if they receive such payments, soft commission compensation, such as free trips, share options, discounted loans and office supplies are not covered by the regulations which govern investment advisers.
Although the Financial Planning Association (FPA) and the Investment and Financial Services Association (IFSA) have drafted a joint code of practice to which they hope to put the finishing touches by the end of this year, the AIA has argued that the FPA already has a code of ethics relating to soft commissions, which is often ignored by its members.
According to a report in the Sydney Morning Herald, AIA President, Bob Andrew this week urged FPA and IFSA members to refuse to accept soft commissions, announcing that:
"We are disappointed that the financial service industry continues to indulge in the unsavoury practice of extra commissions and incentives designed solely for the purpose of selling particular investments to consumers."
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