Conceptualizing financial advice in Australia: The impact

of business models and external stakeholders on client’s

best interest practice

D. W. Richardsa,*, E. F. Mortona

aSchool of Accounting, RMIT University, Melbourne Australia

Abstract

Many individuals entrust financial advisors to navigate through important financial decisions, yet

extant research and persistent scandals bring the effectiveness of advice into question. In examining

the Australian financial advice sector, we determine when financial advice can be provided in a cli-

ent’s best interest and formulate a model differentiating types of financial advice and their relation-

ship to best interest practice. We extend this model to form an integrated framework considering

external stakeholders that encourage, and business models which prevent, best interest practice. Our

examination reveals some business models prioritize financial institution interests whilst thwarting

external stakeholders encouraging best interest practice. © 2019 Academy of Financial Services. All

rights reserved.

1. Introduction

Because of an aging population and increased longevity, the responsibility of being finan-

cially stable in retirement has moved from the state to the individual and is illustrated by a

decrease in state funded pensions with an increase in mandatory personal retirement

accounts (Holzmann, 2013). Creating a sound financial plan is difficult when considering

the complexity of ones’ life and the myriad of financial products available. Professionals,

such as the financial advisor1, have a fiduciary duty—or a duty to act in a client’s best interest—

*Corresponding author: Tel.: +61 3 9925 5935; fax: +61 3 9925 5624.

E-mail address: daniel.richards@rmit.edu.au (D. W. Richards)

1057-0810/20/$ – see front matter © 2019 Academy of Financial Services. All rights reserved.

Financial Services Review 28 (2020) 133–158



when they provide services to navigate through financial decisions and in doing so mitigate or

avoid risking conflicts of interest. Yet, the financial advisors providing advice are employed or

remunerated by financial institutions that have differing and arguably conflicting interests; and,

in particular, financial interests in attaining consumers of the products they create. As such, fi-

nancial advisors are inherently caught between acting in a client’s best interest and their own

interests, or the interests of financial institutions.

This research investigates the extent to which financial advice in Australia can be pro-

vided in a client’s best interest. We address this from a contextual perspective, where we

identify the impediments and enablers of financial advisors achieving client’s best interest

practice. This research investigates dimensions that distinguish types of financial advice, the

business models used in providing financial advice and external stakeholders in the

Australian financial services industry that may induce or mitigate prioritizing a client’s best

interest. In order to address these topics, we conducted a qualitative study encompassing

content analysis, in-depth interviews and triangulation. Firstly, the content analysis included

analyzing Australian government inquiries into financial advice (Parliamentary Joint

Committee on Corporations and Financial Services (PJCCFS) inquiries). Then in-depth

semi-structured qualitative interviews were conducted with financial service professionals to

test the validity of our findings emerging from the content analysis. Finally, results were

then triangulated with an Australian Royal Commission into Misconduct in the Banking,

Superannuation and Financial Services Industry (henceforth referred to as ‘Royal

Commission’). Using these data, we conceptualize financial advice, and its purported con-

flict, in relation to acting in a client’s best interest.

The contributions of this article are threefold. Firstly, we develop a general model of best

interest practice in financial advice, showing the extent to which a client’s best interest can

be prioritized is due to the Orientation of advice (product advice or personal advice) and

Alignment of the advisor (integrated with or independent from product providers). As such,

this model conceptualizes the differing forms of financial advice and clarifies which type of

advice can prioritize a client’s best interest.

The second contribution addresses the dearth of understanding through the inclusion of

the contextual environment that influence financial advisors. Extant research is largely inter-

national and shows presence of conflicts (Foerster, Linnainmaa, Melzer, & Previtero, 2017;

Hackethal, Haliassos, & Jappelli, 2012; Hoechle, Ruenzi, Schaub, & Schmid, 2018), but

simplifies explanation of contextual issues of financial advisors work to remuneration

(Angelova & Regner 2013). While remuneration influences how financial advisors operate,

this article argues that an understanding of the Australian business models in which financial

advisers operate in, as well as external stakeholders that impose numerous levels of regula-

tion and influence upon the financial advisor, are necessary. We find that within the

Australian context, business models and external stakeholders can enable or inhibit the abil-

ity of a financial advisor to act in a client’s best interest.

The third contribution of this article is the articulation of the interaction between the na-

ture of advice provided, the business models and external stakeholders. This is explained

through the development of a holistic and integrated framework. The framework illustrates

how initiatives by external stakeholders aimed at achieving client’s best interest practice are

impeded by certain business models. As such, this framework offers more meaningful

134 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



insights and implications for policymakers, financial planners, and clients by conceptualiz-

ing where initiatives should be targeted to effectively influence changes in the financial

advice industry in Australia. Therefore, this article offers timely clarity on current

Australian initiatives that are thwarted by structural barriers and, therefore, are at risk of

becoming blunt tools of change.

The remainder of the article is structured as follows. Next is a review of the literature on

financial advice and client’s best interest. After this, the research objectives and methodol-

ogy are outlined. Next, the findings are outlined in three sections: a general model of a cli-

ent’s best interest in financial advice, three business models in financial advice and the

external stakeholders influencing best interest practice. Finally, this analysis is brought to-

gether through an integrated framework, followed by concluding comments.

2. Literature review

2.1. Conceptualizing the “financial advisor” in respect of financial advice

2.1.1. The scope of the “financial advisor”

Our article purposely uses the holistic term of “financial advisor” to encompass the many

occupations and professions that offer financial advice. For example, the following occupa-

tions and professions have an element of financial advice in their work: financial planner,

investment advisor, wealth advisor, tax advisor, stockbroker, financial product sales agent,

mortgage broker, real estate agent, accountant, or lawyer. From this perspective, advice can

be considered financial advice if “it is intended to influence a person or persons in making a

decision about a particular financial product” (Australian Securities & Investment

Commission (ASIC) 2016: 5). Our holistic perspective can be contrasted with a narrower

focus, such as on the financial planner alone within the international setting. Warschauer

(2002: 204), considered financial planning in particular, noting that “one can be a financial

adviser or consultant or give financial advice without being a financial planner, but one is

not practicing as a financial planner without the elements of the definition and the process

intact.” Our perspective focuses on the outcome of the provision of financial advice, rather

than the provider process, and as such captures numerous providers of financial advice. In

that sense, both a lawyer and a stockbroker are providing financial advice, but the advice

they provide may differ greatly. In doing so, we can “capture the diversity and complexity

of financial planning engagement” (Heckman, Seay, Kim, & Letkiewicz, 2016: 442) more

broadly.

2.1.2. Client’s best interest

An overarching element of financial advice is that clients seek advice to aid in making fi-

nancial decisions because of an inability to undertake these decisions wholly by themselves.

Prioritizing a client’s best interest is an element of financial advice because the client is

entrusting some aspects of decision making to the financial advisor (Inderst & Ottaviani,

2012b). We use the terminology client’s best interest, but this is akin to fiduciary duty in

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 135



financial services (Boatright, 2000), with the terms used interchangeably in academic litera-

ture (Angel & McCabe, 2013) and financial advice practice (Maley, 2018). Boatright (2000:

202) states “fiduciary duties are the duties of a fiduciary to act in that other person’s interest

without gaining any material benefit except with the knowledge and consent of that person.”

With this in mind, a client’s best interest duty is obliged in financial advice but has some

limitations. Firstly, this duty obscures the type of advice being provided and whether a cli-

ent’s best interest obligation is enacted. Some advice, such as TV commercials of financial

products, by their nature, are presenting information. Yet, this information provider cannot

aim to be acting in a client’s best interest as the client’s interest is unknown. However, such

information is used to influence financial decisions and should be considered financial

advice. Secondly, there is a growing amount of research that suggests that a client’s best in-

terest duty is not being met by financial advisors. However, this reflects an international con-

text and because of local regulatory environments poses issues of generalizability.

2.2. An international perspective on conflicts of interest

Examining the international setting, extant research reveals conflicting effectiveness of fi-

nancial advice. Relevant research shows that many individuals entrust financial advisors (or

financial planners) to help navigate through financial decision making (e.g., within the

Italian context: Calcagno, Giofre, & Urzi-Brancati, 2017). However, inconsistency can be

seen in the effectiveness of financial advisors and their advice. Foerster et al. (2017) find

that on-going commission-based fees charged by financial advisors reduce investment per-

formance for investors in Canada. In Germany, Hackethal et al. (2012) find that portfolio

performance of investors who use bank financial advisors is inferior to independent financial

advisors. Whilst in Switzerland, Hoechle et al. (2018) find that advised clients incur worse

returns than independent clients and that advised transactions focus on mutual funds which

are more profitable for the advisor’s employer. These findings can be compared with other

jurisidictions, where research advocates the benefits of financial advice in creating less bias,

improved returns and more diversified portfolios (Kramer, 2012; Shapira & Venezia, 2001;

von Gaudecker, 2015).

Further international research reveals that organizational structure (within a firm) and the

local regulatory environment are important in considering the effectiveness of financial

advice. Within the U.S. setting, Bigel (2000) finds that a longer tenure as a financial planner

is positively related to a decrease in ethical reasoning ability, yet individual incentives (com-

pensation via commission v. fee for service) are not. Mazzoli and Nicolini (2010) compare

different compensation structures across the financial advice industries in Italy and the

United States. They find that more opaque pricing strategies occur when financial advisors

are tied to financial institutions and product providers. Independent financial advisors are

more likely to have transparent fee structures and adopt a fee for service style of

compensation.

An argument presented to explain why a client’s best interest is not being met is that ma-

terial benefits (commissions) provided to financial advisors negate this obligation. For exam-

ple, Inderst and Ottaviani (2009, 2012a) use economic models of financial advice to show

the inherent conflicts of interest when incentives from product providers are high. Similarly,

136 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



Angelova and Regner (2013) show that truth telling decreases in the presence of commis-

sions. However, material benefits encapsulate some, but not all, of the contextual issues

which impede financial advice from achieving client’s best interest practice. Šindelá�r and
Budinský (2017) find that commissions do not apply homogenously in the Czech Republic.

In particular, they note that organizational structures need to be considered as the relation-

ship between commissions and quality of financial advice only hold in flat-business structure

models (Šindelá�r & Budinský, 2017).

International literature also suggests disclosure is not an effective method for negating

conflicts of interest in financial advice (Chater, Huck, & Inderst, 2010; Rubin, 2015),

because trust binds clients to their financial advisors (Gennaioli, Shleifer, & Vishny, 2015).

That is, the trust that a client has in their advisors will allow clients to use financial advice

when conflicts of interest are disclosed. This is consistent with empirical research in Italy,

which shows there is a high level of trust reported by clients of advisors and if a client’s trust

is higher, they are more inclined to delegate decisions to financial advisors (Calcagno et al.,

2017). Calcagno et al. (2017) find that 74% of clients that hold risky assets do not attempt to

influence their financial advisors. Out of the 26% investors that do influence decisions, they

do so by monitoring (19%), obtaining second opinions (3.4%), or both (3.3%). These results

indicate that most clients trust their advisor’s financial advice and that they will not enforce

a strict client’s best interest practice on financial advisors.

Within this international setting, there is a variety of regulatory frameworks and contrast-

ing contextual factors. Therefore, this limits the potential generalizability to the Australian

context. Moreover, within the Australian context there is minimal empirical research consid-

ering the ethical behavior of financial advisors (Cull & Bowyer, 2017).

2.3. The Australian financial advice industry

The Australian financial advice industry has experienced rapid growth since 2002, driven

by social, cultural, institutional, political and economic factors (Cull, 2009). Following a

government inquiry in 1996 (called theWallis Inquiry), Australia adopted an authorized rep-

resentative governance model to regulate this growing industry (McInnes, 2020). Under this

model, an Australian financial services licensee (henceforth called a ‘licensee’) can author-

ize a financial advisor to give advice on their behalf and also takes responsibility to ensure

that their financial advisors comply with relevant legislation. The effectiveness of this model

is under question as extreme market conditions, numerous scandals and conflicts of interests

have caused havoc in Australia’s financial advice industry (North, 2015).

McInnes (2020) researched the legitimacy of the authorized representative governance

model and highlights that problems of independence of financial advisors from product pro-

viders have persisted since 2009. McInnes surveyed financial advisors in Australia finding

that financial advisors did not report having independence as an authorized representative.

This is a critical issue given the importance of financial advisors within the Australian con-

text. Clients often trust financial advisors to navigate complexities within the financial envi-

ronment, especially when many consumers have low levels of financial literacy (Brimble &

Murphy, 2012). Hunt, Brimble, and Freudenberg (2011) find that trust in the relationship

between clients and financial planners is critical for relationship quality. A lack of

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independence can break this trust and, unsurprisingly, Australia has seen an increase in regu-

lation and scrutiny to increase trust in the industry (Cull & Sloan, 2016). Recently, Cull and

Bowyer (2017) find that clients rank ethical values as more important than technical compe-

tence in a financial advisor.

2.4. Client’s best interest in Australia

Looking specifically at the regulatory context, at the most basic level, financial advice is

governed by the laws of equity as well as common law, imposing duties on a financial advi-

sor creating an obligation to act in a client’s best interest. Common law places a duty of care

on professionals in contract and tort. Glover (2002) argues that when professionals possess

special expertise, they must render services to a client according to ‘prevailing community

standards’ because they a liable in contract or in tort. As the financial advisor is providing

expertise to clients, they are liable to ensure advice is provided at community standards.

There is also legal precedent of a fiduciary requirement more generally in financial

services.2

The community standards can be ascertained from professional association’s exhortations

and legal requirements which stress a client’s best interest standard to resolve and avoid con-

flicts of interests (Glover, 2002; Batten & Pearson, 2013). The two major professional bodies

are the Financial Planning Association of Australia (FPA) and the Association of Financial

Advisers (AFA) whose code of ethics include principles such as client first (FPA, 2013) and

best interests (AFA, 2018), respectively. In addition, all financial advisors are governed by a

new code of ethics, established by the Financial Adviser Standards and Ethics Authority

(FASEA), which includes the Ethical Behaviour. “You must act with integrity and in the

best interests of each of your clients” (FASEA, 2019). Moreover, this code has legislative

backing via Section 921E of the Corporations Act 2001 (Cth) (‘Corporations Act’), requir-

ing all financial advisors to comply with the code.

A client’s best interest obligations was also legislated in Part 7.7A Corporations Act, fol-

lowing the Future of Financial Advice (FOFA) reforms in 2012 (North, 2015). The reforms

cover best interest obligations (Division 2); charging of ongoing fees (Division 3); conflicted

remuneration (Division 4); and banned remuneration (Division 5). For example, Section

961B(1) states that “the provider must act in the best interests of the client in relation to the

advice” and s961B(2) details a “safe harboring” process to show satisfaction of this duty.

Moreover, s961J specifies that priority must be given to the clients’ interest where there is a

conflict and the advisor may face civil penalties if this duty is contravened (Batten &

Pearson, 2013).

In summary, extant literature suggests that local organizational structures and regulatory

environments are important factors influencing whether financial advice is provided in a cli-

ent’s best interest. Within the Australian setting, there is a developed financial advice indus-

try that has undergone significant regulatory reform, yet pervasive misconduct has continued

(the Royal Commission offers the most recent summary). Despite this, the Australian setting

is infrequently researched or theorized (exceptions being Cull, 2009; McInnes 2020; North,

2015) and relevantly, despite having established client’s best interest obligations for finan-

cial advisors, impediments in meeting this duty continue to persist. This research, therefore,

138 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



investigates this setting holistically by researching when financial advice can be provided in

a client’s best interest. It also researches the business models and wider environment, includ-

ing key external stakeholders, that can enable and/or impede the providing of financial

advice in a client’s best interest. In doing so, the research aims to reveal the stakeholders

that encourage, and the business models which prevent, client’s best interest practice.

3. Methodology

We undertake an exploratory and mixed methodology that utilises both document analysis

and interviews to achieve the research aims (Morse, 2003). The exploratory qualitative

methodology was adopted so that theory could be generated from data. The research process

was carried out in three phases.

The first phase involved content analysis of archival data, including regulatory documents

on financial advice, to ascertain how financial advice was regulated and governed in

Australia. This data was PJCCFS inquiries into financial advice (see Appendix 1, Table 1).

The data were coded using Nvivo 11 into three broad categories: (1) Professional challenges

facing financial advice, (2) State regulation and other control, and (3) the professional com-

munity. Using these data, theories on the regulatory factors influencing how financial advice

is governed were developed so that they could be explored through the second phase, in-

depth semi-structured qualitative interviews.

The interviews were conducted with eight financial advisors and one governance director

(refer to Appendix 1, Table 2) to gain insight into the contextual factors of financial advice

in practice. As Sandy and Dumay (2011: 255) note, “The benefit of the research interview

lies in its unique ability to uncover the private and sometimes incommunicable social world

of the interviewee, to gain insight into alternative assumptions and ways of seeing.” This

allowed us to gather further information outside of the archival data, including interpreta-

tions and perceptions of pertinent participants in the financial advice industry. As such, this

enabled us to augment the identified business models and influences developed in phase one

of the project.

Comparable to Cull and Bowyer (2017), interviewees were selected randomly from finan-

cial advisors in Victoria, Australia, verified by ASIC and contactable through public regis-

ters of financial advisors, including the Yellow Pages, the FPA and AFA websites.3 Further

participants were then contacted through referrals from other participants. As such, the

cohort represents financial advisors currently practicing in the field and excludes advisors

not currently authorized by a financial service license holder to practice. The interviews

were conducted in person and the average length was 54 minutes (mean), ranging between

33 and 79 minutes. Ethical approval was obtained before interviews being conduct and par-

ticipant anonymity has been maintained.

In these interviews, open-ended questions on the contextual factors surrounding financial

advisors were posed so that respondents could explain how they perceived financial advice

was being influenced by various parties (see Appendix 1, Table 3). Business models of fi-

nancial advice were presented in the interview to verify their accuracy and changes were

made iteratively. This process of beginning with open-ended questions, followed by targeted

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 139



questions can be described as direct content analysis (Hsieh & Shannon, 2005). Here, the

goal of the interview process is centered around validating or extending the theoretical

framework or theory proffered (Hsieh & Shannon, 2005). In particular, the findings from the

interviews support and extend the theories developed from the document review process.

We use this process to verify a general model of a client’s best interest in financial advice,

business models, and contextual factors that can explain client’s best interest practice.

In the final phase of this research, triangulation was undertaken using the Royal

Commission conducted in Australia (interim report published in 2018 and final report in

2019). These reports offered new insight into how financial advice is regulated and gov-

erned in Australia and, therefore, offered a third source of data for this research project.

We reviewed the Royal Commission reports and reconciled their key findings with the

findings of this research project. Triangulation strengthens the validity of the research

findings and, therefore, enabled the refinement of the models and framework presented

in this article.

4. Findings

4.1. Two dimensions in a client’s best interest in financial advice

The analysis of the government inquiries into financial advice revealed two dimensions

underpinning the giving of financial advice in a client’s best interest. These were

Orientation and Alignment.

4.1.1. Orientation and alignment

An important distinction made in defining financial advice is between personal advice

and general advice. This is summed up succinctly by this quote:

The Corporations Act 2001 defines ‘personal advice’ in Section 766B(3) as financial product advice

given or directed to a person (including by electronic means) in circumstances where: the person

giving the advice has considered one or more of the client’s objectives, financial situation and needs

. . . “General advice” is defined in Section 766B(4) as financial product advice that is not “personal

advice.” (Report 3: 18)

Here the differentiator between personal and general financial advice is the information

that the advice is based on. We refer to this as Orientation and it is the extent to which a fi-

nancial advisor is basing their advice on product characteristics or a client’s characteristics.

Financial advice which focuses on the product is conveying the essential information about

that product to possible users of the product. The basis of the information given is on the

technical details of the product. Financial advice that focuses on the client’s characteristics

takes into consideration a client’s financial situation, objectives and risk tolerance to formu-

late the advice given. That is, the basis of the advice provided is taken from the client’s sit-

uation and it matches products or a strategy to their situation. We conjecture that Orientation

is considered a continuum, where variability exists between these two positions as financial

advice can be more product- or more client-focused.

140 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



A second differentiator that came under scrutiny in many government inquiries was

whose interests are being served. This can be illustrated by the following quote:

Where an adviser is employed by, or aligned with and acts on behalf of, a principal who manufac-

tures or sells financial products, the adviser’s interests (and the principal’s) will be advanced by per-

suading a client to acquire one of the principal’s products. (Report 2: 18)

Therefore, in one extreme a financial advisor will serve the interests of product providers

and in the other extreme a financial advisor is independent of product providers. We use the

term Alignment to represent differences in the relationship between a financial advisor and a

product provider. An integral aspect, but not the sole aspect, of alignment, is the remunera-

tion model used to conduct financial advice. This perspective is noted in Report 2 (:190):

Although the most obvious conflicts of interest affecting the provision of financial advice are the

conflicts between an adviser’s duty and his or her financial interests, they are not the only conflicts.

Other conflicts can also arise from the associations or relationships between a financial adviser and

the issuer of financial products.

At one end of the Alignment continuum, the financial advisor is fully aligned with product

providers and the product provider is the financial advisors’ sole source of income. In this

situation, a financial advisor does not charge a client for advice but receives their income

from products providers. The other extreme is where the financial advisor is independent of

product providers and their income is generated from charging fees to clients, even at a flat

rate. Variability exists between these two points where a financial advisor will earn income

from both product providers and clients or may charge fees depending on the value of assets

under management. Furthermore, another influence on alignment is the business model

(reviewed in Section 4.2) used to provide financial advice, as this engenders a close align-

ment with, or independence from, financial product providers.

4.1.2. A general model of a client’s best interest in financial advice

In the government inquiries these two dimensions of financial advice are conflated as being

one dimension. For example, Report 3 proposes to rename general financial advice as sales or

product information to resolve misleading representation and conflicts of interest. However,

our research finds that structural issues run deep, as illustrated by the following quote:

The industry is still structurally broken because . . . the industry was born out of product providers

wanting to distribute their product, (and) financial planners were merely just . . . a part of the distri-
bution arm. (Participant 2)

An improved model is needed to conceptualize how financial advice is provided in a cli-

ent’s best interest. We propose the dimensions should be intersected to construct a general

model of a client’s best interest in financial advice. Fig. 1 presents a graphic form of this

model.

These intersecting dimensions lead to four categories of financial advice we term:

Brokers, Agents, Advisors, and Best Interest Advisors (BIAs). Using this model, it is possible

to classify occupations that provide financial advice and the extent to which they can achieve

client’s best interest practice.

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 141



Brokers refer to those financial professions where alignment is independent of product

providers and the information provided is specifically product advice. An example of this is

a stockbroker. A stockbroker provides information about stocks to clients; however, is inde-

pendent of the stocks being recommended. Brokers will have remuneration models that are

separate from product providers, such as charging commissions to clients for each transac-

tion. One of the impediments to stockbrokers achieving best interest practices is its orienta-

tion towards product (stock) based information.

Agents refer to those providing financial advice that is product based and connected to the

product provider. An example is a real estate agent selling investment opportunities. These

agents give specific information on a product (real estate) that is not based on a client’s cir-

cumstances. The agent receives remuneration from the product provider, often when a trans-

action has been completed. A real estate agent is far from achieving client’s best interest

practice as their alignment is specifically with the product provider (seller of the property)

and orientation is focused on the product. An antithesis example in real estate is a buyer’s

advocate who focuses specifically on their clients’ needs and has no orientation towards a

product provider, because they will source multiple products.

Advisors are those offering personal advice to clients and are aligned with product pro-

viders. An example is a financial planner working for a large financial institution. In this

position, they offer personal advice to clients as they ascertain a client’s situation, objec-

tives, and risk profile to create their advice. However, the financial advisor is being remuner-

ated and is environmentally constrained by the financial institution. Thus, their

recommendations will be mostly products within the range of products that their financial

institution controls. Advisors have high conflicts of interest as they must serve the product

provider’s interests and attend to a client’s needs.

Lastly, the BIAs, like a broker, is independent of product providers but offers personal

advice matched to a client’s needs. An example of a BIA would be an independent financial

planner. The independent financial planner offers client centered financial advice and is in-

dependent of product providers, as they receive no remuneration from, and are not environ-

mentally constrained by, product providers. Instead, the financial planner may charge a fee-

for-service model where they charge clients based on the quantity of services rendered or a

flat fee for being a client of the advisor.

Fig. 1. A general model for providing financial advice in a client’s best interest.

142 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



A limitation worth noting with this model is that it shows when a client’s best interest can

be prioritized but does not mean they necessarily will achieve best interest practice. This

occurs because conflicts of interest still exist for BIAs, who are independent of product

providers and provide client-based advice. For example, consider a situation where a fi-

nancial advisor provides advice using a fee-for-service model. This advisor will gain

material benefits by charging fees and providing the smallest amount of service possible,

whilst using the time saved to attract new additional clients. This issue was revealed in

Report 1 and Report 2 as “fees for no service,” where ongoing advice fees are being

charged with no advice being given to the client. These reports concluded that poor

advice often given to clients has ultimately led to those clients being left worse off than

if they had been given proper advice.

4.2. Business models of financial advice

International research highlights the importance of organizational structure for finan-

cial advice, but a key theme emanating from our research is that the business models of

financial advice was important for providing financial advice in a client’s best interest.

Yet, these models differ from one advisor to the next, because of the arrangement of

three major parties involved. These parties are: the licensee (the organization or person

licensed by ASIC to provide financial advice services to the public); the financial prod-

uct provider (the organization that makes the product a client uses); and the financial ad-

visor (the person who recommends the product to the client). As previously indicated,

Australia operates an authorized representative model, with the licensee able to author-

ize a financial advisor to give advice on their behalf whilst taking responsibility to

ensure compliance with relevant legislation.

An important aspect of these models is that the work of a financial advisor is largely gov-

erned by the licensee because of several factors. Firstly, the licensee sets the terms under

which financial advice will be given. That is, they create the contract between the financial

advisor and their clients, referred to as the financial services guide (FSG).

An FSG is a general document provided at the commencement of an advice relationship, which

must outline the kinds of financial services and products the licensee is authorized to provide, as

well as any remuneration, commission and other benefits that may be received by the providing en-

tity as a result of advice being offered and any potential conflicts of interest. (Report 5: 3)

Secondly, a licensee will also issue the financial advisor with an approved product list

(APL) that outlines the financial products that a financial advisor can recommend.

Participant 6 describes this as:

Again, another subtle way that providers will try to encourage advisors to use their products and

their platforms over others will be . . . APLs; (these) can be quite restrictive. (Participant 6)

Finally, the licensee will stipulate professional development requirements, suggest finan-

cial services software and conduct audits of the financial advisor practices. Thus, when

assessing the extent to which financial advice is provided in a client’s best interest, it is im-

portant to consider the organizational context of the licensee, financial advisor, and financial

product providers.

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The main three organizations involved with providing financial advisory services can be

arranged into three different business models of financial advice, based on the relationship

between parties. These models were shown, amended and confirmed in the interviews.

Fig. 2 is a graphical illustration of these three models.

4.2.1. Model 1: All groups are the same organization

Model 1 is a business model in which the financial advisor, financial product provider and li-

censee are the same organization. This occurs when a large financial institution, such as a bank,

creates products and obtains a license to give advice and employs financial advisors. In this

model, the alignment of financial advisors is close with product providers as the remuneration is

being provided by that organization. There is also difficultly in this business model distinguish-

ing between the provision of general (product-orientated) advice and personal (client-orientated)

advice. Although a financial advisor will provide personal advice, there may be several other

employees (e.g., such as bank tellers) who provide general advice about the products the organi-

zation offers.

4.2.2. Model 2: All groups are different organizations

In Model 2 all parties work in separate organizations. In this model, the financial advisor

will engage the services of a licensee (often referred to as a dealer group) to obtain authori-

zation to give financial advice. From a legal perspective, the licensee will work as a separate

organization to the financial product provider. However, the relationship between the

Fig. 2. The three business models of financial advice: Licensees, financial product providers, and financial

advisors.

144 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



financial product provider and licensee varies significantly in practice. At one end of the

continuum, the licensee is simply a subsidiary of the financial product provider. Consider

this quote from a financial planner working in Model 2:

There’s two types of product providers. There’s, I call them “internal” and “external”. So, with my

business being licensed through [company name withheld; licensee] any [company name withheld;

product provider] product I consider it internal, because [licensee] are owned by [product provider],

anything else is external. (Participant 7)

In practical terms, Model 2 resembles Model 1, with independence occurring only in a

legal sense and not as separate structures. In contrast, at the other end of the continuum, the

relationship between the financial product provider and the licensee is independent.

Consider this quote from a financial planner in Model 2:

You might use product A, B, or C, . . . you have a relationship with the product provider, you need

to know about it and these types of things, but there’s no contractual obligation in any way, shape or

form to use that product. (Participant 5)

From a client’s point of view, the relationship between the financial product provider and

licensee is not obvious and it is difficult to ascertain the alignment of financial advisors with

product providers. Clients may not be aware of this structural relationship until the product

provider is disclosed in documentation and may not appreciate that nature of this relation-

ship. Nonetheless, business Model 2 is orientated towards providing personal advice rather

than product advice.

It is important to note that there are pressures on licensees to align with product providers

and not be independent. This is noted by this quote:

It is difficult to run a profitable dealer group (licensee) in financial planning. So you do often need to

create some sort of deals, that is where the pressure comes . . . It is very hard for independent dealer
groups . . . where the only revenue they would be getting is from advisor only . . . You have to come

up with arrangements, that can add to the bottom line or they can pass onto advisors for better fees

or whatever. (Participant 2)

4.2.3. Licensee and advisor are the same organization

The final model is Model 3, which involves a financial advisor’s organization, or the fi-

nancial advisor themselves, obtaining their own financial services license and then forming

a relationship with one or many financial product providers to recommend products.

Consider this quote from a financial planner:

I think independence is really important. So we have our own license and we have from the start. . ..
I think being independent and not being incentivized to recommend a particular product or strategy

to a client is most important. (Participant 1)

Model 3 can be seen as the most independent model of financial advice because the li-

censee is not aligned with any financial product provider, but the licensee is aligned with the

financial advisors. It is common in this model that the financial advisor will operate in a fee-

for-service model to remove remuneration from product providers and reduce conflicts of

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 145



interest. This model also specializes in giving personal advice rather product advice.

However, in contrast with the first two models, Model 3 involves more costs for the financial

advisor as they incur the cost of obtaining a license. It also contains the highest amount of

upfront expense for a client whose fee will be paying for the financial advisor to comply

with regulations.

In summary, of the three business models, Model 3 will most likely enable best interest

practice to occur as obtaining an individual license removes the alignment of a financial ad-

visor from a product provider. However, this model is the least common:

Approximately 85% of financial advisers are associated with a product manufacturer, so that many

advisers effectively act as a product pipeline. Of the remainder, the vast majority receive commis-

sions from product manufacturers and so have incentives to sell products. (Report 6: 70)

Despite this, calls to individually license financial advisors have not been endorsed by

parliamentary enquiries into financial advice.

The organizational context and the licensee in particular can be considered the primary

influence over the financial advisor’s financial advice due to having the most power to influ-

ence practices. However, in addition to the organizational context, there is a secondary influ-

ence stemming from external stakeholders that shape financial advice practices. These

stakeholders seek to create or influence a client’s best interest practice in financial advice;

however, experience corresponding impediments created by the particular business models.

4.3. External stakeholders advocating best interest practice

Wider contextual influences beyond the employing financial institution and product pro-

viders can impact how financial advice is provided. Whilst there will be multiple, cultural and

institutional elements which impact financial advice, in this review, we focus the search towards

those people, organizations or government that aim to implement client’s best interest practice

on financial advisors. Analysis of the interview data narrowed this search down to clients, pro-

fessional bodies, ombudsman, education providers, and the government (Fig. 3). The stakehold-

ers and their attempts to promote client’s best interest practice are now delineated.

Fig. 3. External stakeholders seeking to influence financial advice.

146 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



4.3.1. The client

An essential element of financial advice is the relationship that the advisor has with their cli-

ents. This relationship is a two-way interaction where advisors will provide services to clients

but also clients will have the ability to influence and control their advisor. Thus, the client can be

seen as a control mechanism to enforce best interest practice on a financial advisor. Historically,

the Australian context of financial advice has placed a large emphasis on the client influencing fi-

nancial advisors because of the disclosure practices legislated. Some of the disclosure require-

ments of financial advisors include reporting clients’ information about their remuneration

(including commissions), conflicts of interest with product providers and, more recently, an opt-

in requirement for ongoing fee arrangements. A disclosure practice in financial advice assumes

that this process will control the actions of financial advisors and financial institutions.

It could be that clients will choose not to participate in financial advice when conflicts of

interest are disclosed and/or the necessity to disclose such practices will stop conflicts from

arising in the first place. However, when asked about client’s reading of the FSG, a disclo-

sure document provided to clients, one financial planner noted:

I don’t know if a client’s ever read it. I know well, from myself personally, if you go for a financial

product through your insurance and these types of things, I’m sure I’ve never read them either and I

work in the industry. (Participant 5)

Furthermore, government inquires have found that disclosure practices have not been

effective in stopping a persistence of scandals in the financial services industry. Consider

these quotes:

. . . [T]here was a broadly held view that disclosure had been ineffective in managing conflicts of in-

terest, necessitating other more robust measures . . . (Report 6: 111)
The reforms recognize that current disclosure requirements are not, on their own, sufficient to fully

inform consumers. (Report 2: 105)

This suggests that clients will not enforce a strict client’s best interest practice on financial

advisors, irrespective of disclosure requirements.

Moreover, the business models create impediments to the control mechanism proffered

via the client-advisor relationship. With many clients being unaware of the true nature of the

business model, as discussed in Section 4.2, and the majority of business models not posi-

tioned optimally for best interest practice (BIAs), clients may inherently face barriers to

meaningfully influence their financial advisor. In doing so, client influence can be directed

mainly towards perceptions of best interest practice.

4.3.2. Professional bodies

Another influence on the practice of financial advisors is the influence of professional

bodies. Professional bodies require financial advisors to ascertain certain levels of education

and experience before being admitted to the body and, thereafter, undertake training and

assessments to become accredited.

Despite the intention of professional bodies to influence financial advisor practices, and

enforce client’s best interest practice, the ability to achieve this is thwarted. The reason for

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 147



this is the organizational context; the business models previously outlined. In this organiza-

tional context, direct power over a financial advisor is given to the licensee as they authorize

the advisor to give financial advice. In other words, a licensee awards the ability to practice

to a financial advisor and sets the conditions under which a financial advisor practice. A pro-

fessional body’s code of conduct is a secondary influence, which can only be invoked once

the licensee conditions are met. This order of priority is epitomized by the fact that a finan-

cial advisor did not have to be a member of a professional body to practice.

Just as there is no requirement for individual financial advisers to be registered by ASIC, there is

also no requirement for advisers to be members of any particular industry association . . . Both the

FPA and the AFA seek to advance the cause of financial advisers generally. Each seeks to promote

the creation and growth of financial planning and advice as a profession. Both the FPA and AFA

now have processes and systems for discipling members. But the evidence before the Commission

did not show that either the FPA or the AFA currently plays any significant role in maintaining or

enforcing proper standards of conduct by financial advisers. (Report 1: 208)

Moreover, there are many professional bodies within the financial services industry all

competing for membership. Until the shift of authority is moved away from licensees to pro-

fessional bodies, their ability to enforce best interest practice on financial advisors will

remain limited and influence perceptions of best interest practice.

4.3.3. The ombudsman

A requirement for licensees in Australia is that they must provide clients with both an in-

ternal and external complaint service. The term ombudsman is used here to refer to the exter-

nal services bodies that offer external complaint services. Reports 1 and 2 notes that these

bodies amalgamated into a single external dispute resolution service; the Australian

Financial Complaints Authority (AFCA). When asked if the ombudsman service influences

practices in financial advice one respondent noted:

No I don’t think it does. I don’t think advisors think too much about what may come of the advice

they are giving . . . I think most day to day advisors, they say that the complaint schemes are there.

It’s part of the industry and I think the advisors don’t think on it too much. (Participant 2)

Whilst the ombudsman service could enforce best interest practice on financial advisors,

its ability to influence financial advisors is limited because of its reactive nature. Rather than

being a proactive influence on advice, they adjudicate on any customer complaints only after

the issues are raised. This reduces the effectiveness of an ombudsman service to enforce best

interest practice on financial advice. It is possible though, that a decision made by an om-

budsman could guide financial advice as they serve as examples of malpractice and the om-

budsman could conduct outreach initiatives to influence financial advice. At the moment,

such practices do not regularly occur in Australia.

The ombudsman service can also have an indirect influence over financial advisors as the

advisors will require professional indemnity insurance, which is typically purchased by the

licensee. If a financial advisor is involved with monetary resolutions from an ombudsman

service, then the professional indemnity insurers will be involved to cover these costs. As a

result, premiums for professional indemnity will increase following resolutions and the

148 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



licensee may review practices, including impediments to best interest practice, to reduce pro-

fessional indemnity insurance premiums. However, this review of practices to increase a client’s

best interest practice again relies on the licensee enforcing it. If a licensee is closely aligned

with financial product providers, then it will not change practices to enforce a prioritization of a

client’s best interest because of this alignment. Thus, the ability for an ombudsman service to

enforce client’s best interest practice is impeded by the license business model.

4.3.4. Education providers

Education providers influence how financial advice is given by providing initial education

and also providing ongoing professional development. A strong argument presented in the

government enquiry data is that prerequisites to give financial advice, set at a diploma level,

are too low and that one factor to improve financial advice should be to raise the qualifica-

tion level. For example:

Lifting the qualifications of financial advisers and the standards of advice provided to consumers

and investors becomes just one important defense mechanism to help reduce the risk of failure in

the broader system. (Report 3: 15)

Thus, the education level has been raised with new entrants to financial advice requiring a

degree from 2019, whilst existing advisors have until January 1, 2024 to meet the new

requirements (FASEA, 2018). Going forward universities will play more of a role in influ-

encing financial advisors by educating future advisors on best practice in the workforce.

Education does present an ability to influence financial advisors towards client’s best in-

terest practice. Through rigorous ethics training, education providers could create the frame-

work and discourse for considering a client’s best interest in financial advice. The ability to

implement has previously been limited for two reasons. Firstly, licensees could stipulate some

of the CPD that a financial advisor undertakes and thus may not include courses on ethics and

conducting advice in a client’s best interest. Secondly, education does not fundamentally change

the alignment between a financial advisor and a product provider that causes breaches in a cli-

ent’s best interest practice. This relationship is controlled by the licensee who authorizes the fi-

nancial advisor and controls the terms under which the financial advisor operates. Thus, whilst

education can offer an opportunity to improve client’s best interest practice of financial advisors,

it has been thwarted by the context in which a financial advisor operates.

4.3.5. Government

In addition, the Government also has two organizations it uses to enact legislation: ASIC

and more recently, FASEA. ASIC controls the financial services environment in Australia

and is responsible for enacting legislation by creating regulatory guides that govern financial

advice. Thus, it yields substantial influence over both licensee and a direct influence over fi-

nancial advisors via a register it maintains (ASIC, 2017). The register provides the

Australian public with a list of all past and present financial advisors who are or have been

allowed to practice in Australia. The information on public display includes the advisor’s:

name, unique identifier, status (current or ceased), licensee, qualifications, affiliations, prod-

ucts they can advise on, appointments, and any disciplinary actions.

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 149



ASIC can change an advisor’s status following disciplinary action where their right to pro-

vide financial advice is revoked. However, Report 1 finds ASIC has a fragmented and ineffec-

tive disciplinary system for financial advisors and explains the reason for this where it states:

ASIC said that, as a regulator, its role is to oversee advisers’ compliance with the law and not to

supervise or monitor their work. It said that primary responsibility for discipline lies with licensees,

who are responsible under the law for the conduct of their advisers. (Report 1: 209)

Report 1 also noted that licensees were not sufficiently sharing information about advisors

with ASIC. Some research participants also noted issues with ASIC sharing information with

them:

So it’s really frustrating when you deal with ASIC. To be honest . . . beyond . . . lodging the required
forms I have no involvement. We’ve not had an ASIC review done. I’d welcome it because . . . you
get some great feedback and know when you’re on the right path. (Participant 4)

The second control mechanism by which the government directly influences financial advice

is FASEA formed in 2017. This authority comprises of members from industry, professional

bodies and universities. Its primary role is to implement changes to the Corporations Act in

2017 which raise the education, training, and ethical standards of financial advisers (FASEA,

2018). FASEA will govern via indirect and direct methods. Indirect governance occurs through

accreditation of universities financial advisory degrees to ensure financial advisors receive the

education needed to improve the professionalism of the financial advice industry. Direct gover-

nance occurs through enforcing a national exam, professional year, continuous professional de-

velopment and a code of ethics to ensure the competency of financial advisors.

Thus, the Government, also can influence financial advice through legislation, ASIC and,

more recently, FASEA. Despite legislation being passed, a prevalence of misconduct still

occurs in financial services. Why does misconduct persist despite new legislation? We con-

tend that a reason is that the relationship between financial advisors, licensees, and product

providers remains unchanged. This relationship ensures that efforts by ASIC and FASEA to

control financial advisors come secondary to the relationship between a licensee and finan-

cial advisor. That is, even though a register, a degree, a national exam and a code of ethics

are enforced on financial advisors, their ability to practice and the conditions under which

they practice are set by the licensee. Thus, the ability for government to create best interest

practice in financial advice will be thwarted until the mechanism is stopped.

To articulate the interaction between the nature of advice provided and the environmental

considerations, this article now extends the broad applicability of the general model of best

interest in financial advice to the specific context of Australia, conceptualizing the environ-

mental factors that enable (inhibit) client’s best interest practice in financial advice.

5. Discussion

5.1. An integrated framework

The findings of this research are used to create a general model of providing financial

advice in a client’s best interests using two continuums: Orientation and Alignment. This

150 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



model shows that the conditions under which financial advice is most likely to prioritize a

client’s best interest practice—and, therefore, more likely to be effective and beneficial to

investors—is when Orientation is client centered and Alignment is independent from product

providers. When these dimensions are aligned, they are labelled as Best Interest Advisors

(BIAs) in Fig. 1. This model offers theoretical clarity to financial advice and policy implica-

tions on who should be held to a client’s best interest obligation.

A second finding is that an understanding of the business model is required in order to

determine the ability of a financial advisor to align with the BIA classification. As described,

financial advice in Australia can occur via three different business models due to the licens-

ing structure legislated and are outlined in Fig. 2:

• Model 1 depicts financial advisors as being closely aligned with product providers because the li-

censee, product provider and financial advisor all work for the same company. As such, this model

reduces the capability to prioritize a client’s best interest.
• Model 2 depicts all parties as independent and enables financial advisors to have independence

from product providers, but the extent to which this happens is dependent on how the licensee

operates. In one extreme the licensee could be a subsidiary of the product provider offering no in-

dependence for financial advisors and in the other extreme the licensee could be entirely independ-

ent of product providers. Importantly, this relationship is difficult for a client to understand, even if

disclosed to them.
• Model 3 depicts a business model where a financial advisor or his/her company, obtains its own

license and forms relationships with one or more financial product providers. This last business

model offers the most opportunity for prioritizing a client’s best interest, as obtaining an individual

license removes alignment of a financial advisor from a product provider. However, this business

model remains the rarest form of business model.

Whilst most of the business models (apart from Model 3) reduce the ability of financial

advisors to achieve best interest practice in financial advice, external stakeholders aim to en-

courage client’s best interest practice by financial advisors: Fig. 3. However, despite these

influences, the same business models inhibit their influences. These business models often

enable licensees to have primary power over financial advisors, creating a barrier for stake-

holder efforts to have an effect. Any aims become secondary to the business model and,

therefore, any initiatives lead to a perceived client’s best interest practice or inherent trust

that are not conceptually aligned with BIAs, and as such do not necessarily result in effective

financial advice to investors.

Layering these organizational and regulatory factors to create an integrated framework,

enables the broad applicability of the general model of best interest in financial advice to be

extended to consider factors that are enabling (inhibiting) in achieving clients best interest

practice (Fig. 4). Inherent within the financial advice context is a narrowing of opportunity for

client’s best interest practice to be achieved because of the business models in operation.

6. Conclusion

Best interest practice is of manifest importance in financial advice, particularly as

personal financial stability is increasingly the responsibility of the individual rather

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 151



than the state. We contend that in considering client’s best interest practice in

Australia, it is not only the individual financial advisor that is important, but also the

influence of the contextual environment that the advisor operates within. Often, the

business models in place are conceptually positioned to prevent or impede financial

advisors from becoming BIAs. As per the general model of a client’s best interest in fi-

nancial advice, these models are less able to enable the Orientation (client-centered)

and Alignment (independent from product providers) that is most likely to prioritize

client’s best interest practice. As such, advice is positioned to be less effective and ben-

eficial to investors.

This article offers important implications for policymakers, financial advisors and clients.

This integrated framework can enable more targeted initiatives towards the nature of the

advice provided in the defined context. Initiatives to promote a client’s best practice should

be targeted at advice with an Orientation towards clients and Alignment independent from

product providers (BIA). Other types of advice (Agents, Brokers, and Advisers), should not

be expected to achieve client’s best interest practice. Creating clarity in roles identified in

this framework would inform on the nature of the advice provided, enable more effective fi-

nancial advice, and lead to better outcomes for investors. However, in doing so, the related

business models need to be considered to ensure financial advisors are enabled to achieve

client’s best interest practice rather than the perception of best interest practice. As such, this

research continues the conversation towards business models and the risk of stakeholder ini-

tiatives functioning as a blunt tool for change. Understanding that initiatives towards BIAs

are substantially thwarted by certain business models (Model 1 and Model 2), suggests that

for progress to occur, the change should be directed towards overcoming the barriers that

business models create.

Fig. 4. The integrated framework. Note: The dark grey shaded areas reflect enabled influences working towards

the prioritizing a client’s best interest, whilst the light grey areas represent inhibited influences.

152 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



Future research opportunities should consider how the business structures and the external

regulatory context in other jurisdictions interact with the general model of best interest in fi-

nancial advice, both in terms of determining the existence and pervasiveness of relative bar-

riers. Such examination would offer potential resolutions to impediments identified in

Australia or vice versa. Considering the substantial controversy within the Australian con-

text, it is paramount that we further the conversation over best interest practice and progress

financial advisors towards the status of BIAs.

6.1. International application of findings

This research focuses on Australia but there is global applicability of our findings because

conflicts of interest in financial advice occur in Switzerland (Hoechle et al., 2018), Germany

(Hackethal et al., 2012), United States (Egan, Matvos, & Seru, 2019), and Canada (Foerster et

al., 2017). The model presented in Fig. 1 can be applied to many contexts and is useful in differ-

entiating types of financial advice that are or are not provided in a client’s best interest. The

business models outlined in Fig. 2 are Australian specific due to the licensing regime legislated

there. The applicability of these business models to other contexts will depend on how financial

advisors are authorized to practice in those contexts. Comparing contexts in terms of how finan-

cial advice is governed would be a worthwhile pursuit because such research could ascertain

strengths and weaknesses of current governance systems. Finally, the various external stakehold-

ers outlined in Fig. 3 will be prevalent in other countries. However, the influence of each stake-

holder over financial advisor will vary from context to context depending on their authority and

the interplay between the relative organizational context and regulatory framework.

Acknowledgment

The authors would like to thank Professor Chris Robinson, Associate Professor Eva Tsahuridu

and two reviewers for their comments on this paper. We also acknowledge the feedback provided

from the presentations at York University, Australian Business Ethics Network Conference

(Melbourne), RMIT University and Personal Finance and Investment Symposium (Melbourne).

Notes

1 Here the term ‘financial advisor’ encompasses numerous consultant categories (fi-

nancial advisors, financial planners, brokers etc.). The encapsulation of what a finan-

cial advisor is, is detailed in a later section.

2 See Justice Jacobsen’s interpretation draws from Finn (1989: 46-47, cited in

Australian Securities and Investments Commission v Citigroup Global Markets

Australia Pty Limited (ACN 113 114 832) (No. 4) [2007] FCA 963 at 274).

3 These websites are www.yellowpages.com.au, https://fpa.com.au/; and www.afa.

asn.au/find-afa-financial-adviser, respectively.

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 153



Appendix 1 Overview of data used for analysis

Table 1 Parliamentary joint committee on corporations and financial services PJCCFS inquiry reports and

Royal Commission reports into misconduct in the banking, superannuation and financial services industry

reports reviewed for this research

Report number Citation Submissions Pages Report name

1 Hayne (2019) 10,323 530 Final Report Royal Commission into Misconduct
in the Banking, Superannuation and Financial
Services Industry Volume 1

2 Hayne (2018) 375 Interim Report Royal Commission into
Misconduct in the Banking, Superannuation
and Financial Services Industry Volume 1

3 PJCCFS (2014) 39 103 Inquiry into proposals to lift the professional, eth-
ical and education standards in the financial
services industry - 2014

4 PJCCFS (2012b) 77 204 Inquiry into the collapse of Trio Capital
5 PJCCFS (2012a) 69 220 Corporations Amendment (Future of Financial

Advice) Bill 2011 and Corporations
Amendment (Further Future of Financial
Advice Measures) Bill 2011

6 PJCCFS (2009) 407 209 Inquiry into financial products and services in
Australia

7 PJCCFS (2003) 49 86 Inquiry into the disclosure of commissions on
risk products

Table 2 Overview of the in-depth interviews

Interview
number

Duration
(HH:MM:SS)

Experience
in financial
services

Position Company size

1 00:53:24 12 Years Financial planner Large corporation 1000+
employees

2 01:12:05 29 Years Financial ombudsman
representative/financial
planner

Boutique 0–5 employees

3 00:51:55 17 Years Financial planner/partner Medium firm 150+ employees
4 01:09:01 16 Years Governance director Medium firm 150+ employees
5 01:03:39 10 Years Business owner/financial

planner
Boutique 0–5 employees

6 01:03:41 5 Years Financial planner Large corporation 50,000+
employees

7 00:38:25 17 Years Business owner/financial
planner

Small firm 5–50 employees

8 00:46:36 28 Years Business owner/financial
planner

Boutique 0–5 employees

9 00:33:43 14 Years Financial planner Boutique 0–5 employees

154 D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158



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rm

s
ar
e
co
m
p
li
ed

w
it
h
?

G
o
v
er
n
an
ce
:
L
ic
en
se

(d
ea
le
r
g
ro
u
p
if
se
p
ar
at
e

fr
o
m

th
e
o
rg
an
iz
at
io
n
)

C
an

y
o
u
o
u
tl
in
e
y
o
u
r
li
ce
n
si
n
g
(d
ea
le
r
g
ro
u
p
)
ar
ra
n
g
em

en
t?

W
h
at
ar
e
y
o
u
r
v
ie
w
s
o
n
th
e
cu
rr
en
t
m
et
h
o
d
o
f
li
ce
n
si
n
g
fo
r
fi
n
an
ci
al
p
la
n
n
er
s/
ad
v
is
o
rs
?
If
th
ey

ar
e
o
r
ar
e

n
o
t
ef
fe
ct
iv
e,
p
le
as
e
ex
p
la
in

w
h
y
?

W
h
at
d
o
y
o
u
b
el
ie
v
e
w
o
u
ld

im
p
ro
v
e
th
e
li
ce
n
se

(d
ea
le
r
g
ro
u
p
)
m
et
h
o
d
o
f
g
o
v
er
n
an
ce

in
fi
n
an
ci
al

ad
v
ic
e?

G
o
v
er
n
an
ce
:
F
in
an
ci
al
p
ro
d
u
ct
p
ro
v
id
er
s

(i
f
se
p
ar
at
e
fr
o
m

th
e
o
rg
an
iz
at
io
n
)

Is
y
o
u
r
fi
n
an
ci
al
p
ro
d
u
ct
p
ro
v
id
er

an
d
li
ce
n
se

h
o
ld
er

th
e
sa
m
e
in
st
it
u
ti
o
n
?
R
el
at
ed
?
O
r
in
d
ep
en
d
en
t?

In
w
h
at
w
ay

d
o
fi
n
an
ci
al
p
ro
d
u
ct
p
ro
v
id
er
s
in
fl
u
en
ce

th
e
w
ay

y
o
u
g
iv
e
fi
n
an
ci
al
ad
v
ic
e?

In
w
h
at
w
ay

is
th
e
in
fl
u
en
ce

o
f
fi
n
an
ci
al
p
ro
d
u
ct
p
ro
v
id
er
s
p
o
si
ti
v
e
fo
r
th
e
fi
n
an
ci
al
ad
v
ic
e
in
d
u
st
ry
?

W
h
at
ab
o
u
t
n
eg
at
iv
e
im

p
ac
ts
?

W
h
at
ar
e
y
o
u
r
v
ie
w
s
o
n
th
e
cu
rr
en
t
m
et
h
o
d
b
y
w
h
ic
h
fi
n
an
ci
al
p
ro
d
u
ct
p
ro
v
id
er
s
ar
e
g
o
v
er
n
ed
?
If
th
ey

ar
e
o
r
ar
e
n
o
t
ef
fe
ct
iv
e,
p
le
as
e
ex
p
la
in

w
h
y
?

G
o
v
er
n
an
ce
:
E
d
u
ca
ti
o
n
an
d
p
ro
fe
ss
io
n
al
b
o
d
ie
s

W
h
at
ar
e
y
o
u
r
v
ie
w
s
o
n
th
e
re
q
u
ir
em

en
t
fo
r
p
ro
fe
ss
io
n
al
q
u
al
ifi
ca
ti
o
n
s
fo
r
fi
n
an
ci
al
p
la
n
n
er
s/
ad
v
is
o
rs
?
If

th
ey

ar
e
n
o
t
ef
fe
ct
iv
e,
p
le
as
e
ex
p
la
in

w
h
y
?

A
re

y
o
u
a
m
em

b
er

o
f
a
p
ro
fe
ss
io
n
al
b
o
d
y
?
W
h
y
o
r
w
h
y
n
o
t?

W
h
at
ar
e
y
o
u
r
v
ie
w
s
o
n
th
e
re
q
u
ir
em

en
ts
fr
o
m

y
o
u
r
p
ro
fe
ss
io
n
al
b
o
d
y
?
If
th
ey

ar
e
o
r
ar
e
n
o
t
ef
fe
ct
iv
e,

p
le
as
e
ex
p
la
in

w
h
y
?

G
o
v
er
n
an
ce
:
C
li
en
ts

W
h
at
in
te
rn
et
/e
x
te
rn
al
cl
ie
n
t
co
m
p
la
in
t
se
rv
ic
es

d
o
y
o
u
h
av
e?

W
h
at
ar
e
y
o
u
r
v
ie
w
s
o
n
th
e
m
et
h
o
d
fo
r
re
so
lv
in
g
d
is
p
u
te
s
w
it
h
cl
ie
n
ts
?
If
th
ey

ar
e/
ar
e
n
o
t
ef
fe
ct
iv
e,

p
le
as
e
ex
p
la
in

w
h
y
?

D
o
th
e
cl
ie
n
t
co
m
p
la
in
t
se
rv
ic
es

in
fl
u
en
ce

h
o
w
y
o
u
g
iv
e
fi
n
an
ci
al
ad
v
ic
e?

O
v
er
al
l:
G
o
v
er
n
an
ce

ef
fe
ct
iv
en
es
s

W
h
at
,
in

y
o
u
r
v
ie
w
,
ar
e
th
e
re
fo
rm

s
th
at
h
av
e
h
ad

th
e
m
o
st
p
o
si
ti
v
e
im

p
ac
t
o
n
y
o
u
r
p
ra
ct
ic
e?

W
h
at
ar
e
th
e
re
fo
rm

s
th
at
h
av
e
h
ad

th
e
m
o
st
n
eg
at
iv
e
im

p
ac
t
o
n
y
o
u
r
p
ra
ct
ic
e?

D
o
y
o
u
b
el
ie
v
e
th
at
th
e
re
fo
rm

s
o
v
er
al
l
ar
e
b
en
efi
ci
al
fo
r
th
e
fi
n
an
ci
al
ad
v
ic
e
in
d
u
st
ry
?
W
h
y
o
r
w
h
y
n
o
t?

W
h
at
ar
e
y
o
u
r
v
ie
w
s
o
n
th
e
cu
rr
en
t
p
en
al
ti
es

fo
r
n
o
n
-c
o
m
p
li
an
ce

o
f
li
ce
n
si
n
g
,
p
ro
fe
ss
io
n
al
q
u
al
ifi
ca
-

ti
o
n
s?

If
th
ey

n
o
t
ef
fe
ct
iv
e,
p
le
as
e
ex
p
la
in

w
h
y
?

O
th
er

to
p
ic
s

O
th
er

q
u
es
ti
o
n
s
m
ay
b
e
as
k
ed

as
a
re
su
lt
o
f
th
e
an
sw

er
s
g
iv
en

to
q
u
es
ti
o
n
s
ab
o
v
e.

D. W. Richards, E. F. Morton / Financial Services Review 28 (2020) 133–158 155



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