Untouched by the FOFA reforms and a common bug bear of independent financial advisers, the term is used more broadly to refer to the practice of cross-subsidisation within large ‘vertically integrated’ financial institutions, resulting in incentives to recommend in-house products or in some way benefit the parent company’s bottom line.

Some in the financial advice industry believe it is a gross form of conflicted remuneration, others think it is simply good business. What is clear is that the issue, while largely dormant throughout the FOFA consultation process, is gaining traction as a matter of concern among policymakers and their regulatory agents.

In November 2013, at a conference of independent financial advisers in Tasmania, Senator Arthur Sinodinos put the issue firmly on the agenda, suggesting the government is keen to review vertical integration in the financial services industry and any conflicts of interest that may arise from the structure.

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