A veteran financial services lawyer has argued licensees should be doing more to train advisers in litigation to better help protect against business risks.
Speaking at the Professional Planner Licensee Summit earlier this month, Coleman Greig Lawyers principal lawyer Peter Bobbin said this is something he has done his whole career as a legal practitioner.
“One of the things licensees can do to help advisers is train them in litigation and the whole gamut of those issues, and make them aware of the risks of business.”
Bobbin said keeping an eye on the whole advice process is important because there are legal risks outside of product advice.
“It ranges from the simplicity of file notes and also understanding the Statement of Advice is not the advice, it’s just a record of it. The actual advice is made up of all the other interactions. That’s where the file note is utterly critical.”
AFCA not the enemy
Also speaking on the session was AFCA lead ombudsman Shail Singh who highlighted why the complaints authority is a friend to advisers.
For those who need a dispute settled by AFCA lawyers are not necessary and legal representation doesn’t help the process.
“What we’re really there for is if you have a dispute with a customer that can’t be resolved internally, [then] it goes to us. Both parties trust us and we can resolve it in a relatively quick period of time.”
It takes around half a year to settle an AFCA dispute and the authority aims to half that timeframe.
This gives confidence to the public, Singh said. He pointed to some organisations who have even chosen to become AFCA members despite not being required to.
“An interesting example is in the crypto space which isn’t regulated. Blockchain Australia, which is the representative bodies for the cryptos, make it mandatory to have membership of AFCA.”
Instead of following the law and legal precedent, AFCA instead relies on its fairness doctrine.
Singh said criticism the authority’s decisions aren’t predictable is unwarranted.
“What we have to do is what is fair in the circumstances in regard to legal principles, precedent and industry practice. In a way it gives us freedom to rise above some of that complication to find a simple answer.”
The disputes found against a financial firm are generally a breach of 912a of the Corporations Act (doing all things necessary to provide services efficiently, honestly and fairly), Singh said, as well as a lack of a clear and concise Statement of Advice.
“Whittled down, those two things would be apparent in a determination against a financial adviser. The criticism we get is AFCA can do what they want but that’s not the aim, the aim is create certainty.”
Singh said his time as an adviser between 2008 and 2010 helped his hone his perception of the world as ombudsman.
“It’s such a useful perspective because you realise how tough it is. It’s not that easy to put together a user-friendly SOA and be customer centric.”