Are there really only 14 'true' IFAs in Australia?

A newly-formed industry association has been set up in Australia – but only 14 firms have so far met its strict criteria for independence.

According to the Independent Financial Advisers Association of Australia (IFAAA), "truly" independent advisers only charge a fixed fee for their work, not a percentage of investments or commissions, including on insurance. They also must not be tied or owned, even partly, by a provider.

Neil Salkow, of Brisbane-based Roskow Independent Advisory and one of the advisers to make the grade, says there are three types of financial adviser in Australia: institutionally-owned, independently-owned and independent.

The first, he says, is owned by a financial institution and means the advice can be "ridden" with conflicts of interest and focused entirely on products that are "normally high fees and poor quality".

According to Salkow, the second would fit the definition of independence in the UK - businesses not owned by institutions but those that may still receive commissions or volume bonuses. "These, in my humble opinion, are no different to institutionally-owned as the advice is still product focused and conflicted," he says.

By Salkow's definition, IFAs Positive Solutions and Origen (owned by Aegon) and Sesame (Friends Provident) should not be able to call themselves independent.

The third, he says, "is what I and a handful of other advisers in Australia represent: the truly independent adviser". He says firms in this category only charge a fixed fee adding, while he can't speak for the other 13 on the list, his focus in very much on life planning over straightforward wealth management.

Essentially, Salkow says, an independent adviser needs to be able to provide advice that is "conflict free" and "truly objective".

"My belief is that the only way this is possible is to charge an agreed fee for client work based on complexity and the work involved in providing the advice, not based on a % of investments or commissions from investment or insurance products."

But the formation of the IFAAA has caused a bit of a stir in Australia. One anonymous critic, writing on an Australian website, says: "I don't have an issue with a group of planners working together for their betterment.

"What I do take offence to is that group holding themselves out to be on some higher moral ground than me, just because they have decided to operate a different business model."