The Australian Securities and Investments Commission (ASIC) will consult with the financial advice industry on plans to better manage conflicts of interest.

It proposes introducing more transparent public reporting on approved product lists, including where client funds are invested, for licensees that are part of vertically integrated businesses.

It follows ASIC’s review of the ways conflicts are managed when major banking and financial institutions provide both personal advice and financial products to retail clients.

The review examined AMP, ANZ, Commonwealth Bank, NAB and Westpac.

About 68% of client funds were invested in in-house products, even though these accounted for only a 21% share of the groups’ approved product lists.

A sample of files examined to determine if the switch to in-house products satisfied the best-interests requirement showed 75% of advisers did not comply with the duty and the switch left 10% of clients in a worse financial position, including inferior insurance.

“ASIC noted that vertical integration can provide economies of scale and other benefits to both the customer and the financial institution,” the regulator says.

“Consumers might choose advice from large vertically integrated firms because they seek that firm’s products due to factors such as convenience and access, and recommendations of in-house products may be appropriate.

“Nonetheless, conflicts of interest are inherent in vertically integrated firms, and these firms still need to properly manage conflicts of interest in their advisory arms and ensure good-quality advice.”