Financial products and sales incentives
Checking limits and connections
It's important to check that an adviser can provide advice about
the financial products you currently own, or if they're limited to
selling particular products.
It also pays to check the relationships the adviser has with any
people or businesses they refer you to.
These checks are important because both of these situations may
influence the advice you receive.
Most advice businesses have an approved product list (APL) that
contains financial products they have researched and given their
advisers authority to provide advice about.
Many APLs contain 'in-house' products. In-house products are
products that are provided by a related party, such as the bank or
other financial institution the adviser is employed by. APLs may
also contain products from an unrelated product provider, which are
not in-house products.
In-house products may create a conflict of interest for the
adviser. See ASIC's media release on how large financial
institutions manage these conflicts of interest.
Without special authority from their licensee, the adviser may
not be able to give you advice about your existing financial
products if they are not on their APL. Instead, the adviser is
likely to recommend a product from their APL.
Before you get advice, it's important to ask the adviser whether
any of your existing products are on their APL.
Check the product areas an adviser can provide advice on.
Financial advisers register
If you already have investments when you see an adviser and they
recommend you switch to one of their in-house products, you should
ask the adviser to explain why your existing investment is no
You may lose important benefits such as insurance if you switch
to another super fund. If you're unhappy with your current fund,
talk to them first. Make sure you understand the pros and cons
before you switch funds.
Don't be pressured into buying an investment or life insurance
product you don't need or want. It can be very difficult to get out
of some investments and if you switch life insurance policies you
could lose the benefits of the previous policy. Make sure the new
product is right for you before you act on the adviser's
If you decide to switch to an in-house product, be aware that
the adviser may receive some sort of benefit, like a performance
bonus for selling you that product.
See questions to ask a
financial adviser for talking points you can use to check the
suitability of any product the adviser recommends.
One stop shops
ASIC has seen a significant increase in advisers offering 'one
stop shop' services that aim to cater for a number of different
financial service needs. This may be a good way for you to save
time, but be aware that it may also mean the adviser receives
monetary benefits for referring you to the other professionals or
businesses they've recommended.
How one stop shops work
An adviser may recommend you set up a self-managed super fund
(SMSF) with a strategy to invest in property. The adviser may refer
you to a property developer that can help you find an investment
property, and may also recommend an accountant to help you with the
paperwork to set up an SMSF.
In this situation, it's important to be aware that the adviser
may have a pre-existing business relationship with the
professionals they've recommended. This means the adviser is likely
to receive a referral fee or other benefits that could amount to
thousands of dollars.
The adviser may also have a personal interest in the property
development or accounting business.
See questions to ask a
financial adviser for talking points you can use to check for
Case study: Rachael and John are advised to set up an
Rachael and John see an adviser about their super.
The adviser recommends that they put their super balances into a
self-managed super fund (SMSF), and that their SMSF borrows
$300,000 to invest in a residential property.
Rachael and John are referred to an accountant, mortgage broker
and property developer to implement the recommendations made by the
of Advice (SOA) they receive says that the advice business does
not have any financial interest in, or receive fees, commissions or
benefits from any products, investments or service providers
recommended in the SOA.
While the advice business does not directly receive any fees or
benefits, the financial adviser is a common owner of all three
businesses he's recommended Rachael and John use. These businesses
will benefit from the adviser's recommendations.
Rachael and John can check if the adviser has any involvement in
the other businesses by doing a company and business search through
ASIC for a small fee or by checking ASIC's financial advisers
Don't be afraid to ask an adviser why they
are recommending a particular product. You should also ask them if
they, or the advice business they work for, will benefit from any
referrals they've made.
Last updated: 27 Aug 2018