The Australian Securities and Investments Commission has issued a stern warning to financial planners who recommend structured and capital protected products to consumers without fully understanding their personal circumstances.
The regulator described the findings of its review into the provision of capital protected products to retail investors as “disappointing” with “many advisers” failing to meet their legal and professional obligations to make adequate inquiries into their clients’ personal situation before selling them complex products.
ASIC deputy chairman Peter Kell said the main areas of concern included inappropriate gearing and advisers narrowing the scope of advice to single structured product or focusing on one product, rather than considering a range of potentially suitable products. The regulator also criticized the ‘one-size fits all’ approach taken by some advisers with little consideration of the clients’ needs and circumstances, or alternative strategies, with a lack of diversification.
“Capital protected products are complex and can be difficult for investors to understand. Advice about them needs to be appropriate and accurate. Where it isn’t, we will take action,” Kell said.
“Where our review identified concerns with the advice provided, we are analysing the cause of the problem and considering appropriate regulatory outcomes. In some cases, we are conducting further surveillance with a view to enforcement action where merited.”
ASIC Report 377 Review of advice on structured products was based on five pieces of advice from each of ten firms which provide these products to retail investors.
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