Independent vs Restricted Financial Advisers — What's the Difference?

In Australia, the term "independent" has a specific legal meaning when used by financial advisers. Under the Corporations Act 2001, an adviser can only call themselves independent if they:

• Receive no commissions or volume-based payments from product providers
• Have no ownership ties to financial product issuers (banks, insurance companies, fund managers)
• Operate under a licensee that is not controlled by a product manufacturer
• Are free to recommend any product on the market, not just those from an approved product list

This is a high bar. Many capable advisers do not meet the strict legal definition of "independent" but still provide excellent advice.

A restricted adviser (sometimes called an "aligned" adviser) typically:

• Works under a licensee that is owned by or affiliated with a bank, insurer, or fund manager
• May be limited to recommending products from an approved product list (APL) maintained by their licensee
• May receive commissions on certain products (particularly insurance)

Important: Restricted does not mean bad. Many restricted advisers provide high-quality advice. The best interest duty applies equally to all advisers — they must recommend what is appropriate for you, even if it means recommending a product not on their APL.

The key difference is that a restricted adviser may have a narrower range of products to choose from, which could limit your options in some cases.

The practical differences between independent and restricted advisers include:

• Product range:**
• Independent advisers can recommend any product on the market
• Restricted advisers may be limited to products on their licensee's approved list, though they must still act in your best interest

• Fee transparency:**
• Independent advisers typically charge fee-for-service with no commissions
• Restricted advisers may earn commissions on some products (disclosed in the FSG and SOA)

• Potential conflicts:**
• Independent advisers have fewer structural conflicts of interest
• Restricted advisers may face pressure (explicit or implicit) to recommend in-house products

• Cost:**
• Independent advisers may charge higher direct fees since they don't receive commissions
• Restricted advisers may appear cheaper upfront but the total cost (including product fees) may be similar

To verify an adviser's independence status:

• Ask them directly — a reputable adviser will be upfront about their business model
• Read the Financial Services Guide (FSG) — this must disclose the licensee, any product relationships, and how the adviser is paid
• Check the licensee — search the ASIC professional registers to see who owns the AFS licence
• Look for the word "independent" — if they use this term, they must meet the legal criteria
• Check our directory — we flag independent advisers where the information is available

• Key questions to ask:
• Who is your licensee, and do they manufacture financial products?
• Are you limited to an approved product list?
• Do you receive any commissions or volume-based payments?
• Can you recommend products from any provider?

Independence is particularly valuable when:

• You need investment advice — an independent adviser can compare the full market
• You are consolidating super — you want advice not biased toward one fund
• You have a complex situation — more product options means more tailored solutions
• You are suspicious of conflicts — independence removes structural bias

• Independence may matter less when:
• You need insurance advice only — commissions are standard in insurance and are disclosed
• You want intra-fund super advice — your super fund's advisers are restricted by design but specialise in that fund
• You have simple needs — a restricted adviser with a good APL may serve you well at lower cost

While independence is an important factor, it is not the only one. When choosing an adviser, also consider:

• Qualifications and experience — are they qualified for your specific needs?
• Communication style — do they explain things clearly?
• Fees — what is the total cost of advice, including any product fees?
• Track record — what do other clients say about their service?
• Specialisation — do they have expertise in your area of need?
• Disciplinary history — check the ASIC register for any banning orders or conditions

The best adviser for you is one who is qualified, transparent, acts in your best interest, and communicates well — whether they are technically independent or not.