Fiduciary duty and the Ripoll Report

Some financial advisers are remunerated by the issuers of financial products according to the volume of their products the advisers sell. Yet the advisers profess to give independent advice to their clients. The conflict between interest and duty is obvious. In November 2009 the Parliamentary Joint Committee on Corporations and Financial Services chaired by Bernie Ripoll MP produced a report entitled Inquiry into Financial Products and Services in Australia which addressed the problem. It recommended introduction of a legislative fiduciary duty for financial advisers requiring them to place their clients interests ahead of their own. This article proposes that this recommendation is inadequate to address the problem and that the only satisfactory solution is to divide the present financial advice industry into two: truly independent advisers who are prohibited from being rewarded by the issuers of financial products on the one hand and the selling agents of such entities on the other.