A leading fee-based investment intermediary has complained to the financial regulator that many businesses offering "free" financial advice are misleading consumers because they are actually selling investments on commission.
Investment intermediary Financial Engineering Network has made a submission to the Irish Financial Services Regulatory Authority (IFSRA) calling for the use of the word "advice" in investment product advertising to be limited.
The submission, made by the company's managing director, Mr Dave Gribben, says investment product retailers and wholesalers should be clearly distinguished from businesses that provide financial advice.
"It is, in our view, misleading for the consumer to believe that they are being provided with financial advice when, in fact, a person is a product retailer," the document says.
"A financial services product retailer provides guidance on the products available for sale through that retailer. They do not provide independent financial advice. This is true regardless of the number of agencies held."
It states that while retailers would argue that the advice is provided as part of the product sale, that advice is inherently biased in favour of the products within the seller's own range.
"It is our view, therefore, that the ability to advertise access to independent advice should be limited to those who are clearly independent and impartial advisers.
"We would go so far as to suggest that the use of the word 'advice' is strictly controlled to avoid confusion," the submission says.
Mr Gribben goes on to argue that the regulation of investment advice and retailing should be distinguished from each other.
Financial Engineering Network provides investment advice to clients on a fee basis. It does not act as an agent for financial institutions. It does sell their investment products but not in return for commissions. The company trades strictly in the zero-commission version of these products.
Its business development director, Mr Paul Overy, stressed that the company was not objecting to the fact that agents sold commission-based products, but he said they should declare this interest to the consumer.
"It's actually impossible to offer free financial advice," Mr Overy told The Irish Times.
"The people who are doing that are actually selling products on commission, they are sales people, not advisers," he added.
Mr Overy pointed out that some of the financial institutions also used advertising offering services such as free mortgage advice. He argued that it was impossible for an institution to give independent advice, as it would only offer its own mortgages to consumers.
