ASIC will next week contact 30 Australian financial services licensees as part of the next phase of its review of financial advice industry practices.
In September 2011, ASIC released Report 251 Review of financial advice industry practice, which included a request for information from the 20 largest AFS licensees that provide financial product advice to retail clients.
Round two turns the regulatory spotlight onto the 30 next largest AFS licensees and they will be requested to complete a smaller questionnaire than that used in the first phase.
A spokesperson for the industry watchdog said the scope of the review was likely to remain with the Top 50 only.
He added that ASIC’s motivation for choosing the Top 50 – as opposed to a random sample – is to review the compliance systems of the licensees that have the greatest potential impact on consumers.
“One of ASIC’s priorities is ensuring investors and financial consumers are confident and informed. The three elements to achieving this are educating investors, holding gatekeepers to account and understanding consumer behaviour,” says ASIC commissioner Peter Kell.
“The review will also inform the financial advisory sector about current industry trends and ASIC’s compliance expectations. Many of the top 20 advisory firms that participated in the first phase of the review reported finding the exercise beneficial and helpful for improving their practices.”
The review will take the form of a questionnaire that will include specific questions on areas like licensee business models, training of representatives, and product and strategic advice.
Specifically, ASIC will use the information from this review to examine financial advice compliance systems and to inform our analysis of the risks facing gatekeepers in the financial advice industry.
Licensees have three months from year-end to respond to ASIC’s questionnaire, which will be sent to licensees over the next week with the watchdog assuring respondents that all information gathered will be confidential.
“Risk-based surveillance is an important part of ASIC’s approach to improving standards in the financial advice industry and holding gatekeepers to account,” said Kell.
“The information gathered in the first phase, which covered the largest 20 AFS licensees, was an essential input to ASIC’s Risk-Based Surveillance Program enabling ASIC to identify what industry risks to prioritise.”
ASIC intends to meet with all licensees in 2012 to discuss responses and individual feedback will be provided to licensees involved.
“The review’s first phase created an opportunity for ASIC to engage with the largest financial advice licensees and provide them with individual feedback,” said Kell.
“We expect those licensees in the second phase to also take a positive approach in engaging with ASIC and take the opportunity to shape the regulatory approach to the financial advice industry for the greater good of consumers across Australia.”
