Financial advisers at the big banks have been found to be biased towards their employer's products, which in some cases has left their customers worse off.
The Australian Securities and Investments Commission conducted a review of financial advice provided by the five largest institutions - ANZ, Commonwealth Bank, National Australian Bank, Westpac and AMP - between 2015 and 2017, with a focus on the advice provided on in-house products.
It showed that advisers who had guided a client to an in-house product had in 75 per cent of cases failed to act in the best interests of the client.
In 10 per cent of those cases, the advice given was likely to have left the customer in a significantly worse financial position, ASIC said.
The watchdog said it has found conflicts of interest are inherent in the big financial institutions offering financial advisers.
Acting ASIC chairman Peter Kell said 79 per cent of the financial products on the approved lists held by the firms were external products, and 21 per cent were in-house products, but 68 per cent of clients' funds were invested in in-house products.
"In most cases there was a clear weighting in the products recommended by advisers towards in-house products," he said.
The Financial Services Council said ASIC's review shows there is still work to be done to address concerns about the quality of financial advice in Australia.
"We look forward to working with ASIC on its proposal to introduce more transparent public reporting on approved product lists," the council said in a statement.
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