Netwealth has updated its terms and conditions to allow it to directly correspond with clients without necessarily needing to inform the adviser or licensee in a sign of the regulator-enforced governance uplift across the wealth platform sector.
According to correspondence sent to advisers and seen by Professional Planner, the updated terms will also give additionally give Netwealth the power to suspend or limit user access, including to address fraud and scam risks.
The platform will also now have clearer rights to request advisers provide advice records, along with the right to ask for formal attestations covering matters such as adviser oversight, fee charging practices and related controls.
The changes are part of governance and security uplifts likely to accelerate across the sector as regulators and the Albanese government scramble to respond to the collapse of the Shield and First Guardian master trusts. It is understood financial regulators have actively urged super platforms to change the way they have ordinarily engaged with customers.
Their communication to stakeholders came just before the Financial Services Council, of which Netwealth is a member, released its best practice standards for platforms on Thursday.
The standards, which come into effect next calendar year, add more stringent requirements for trustees to conduct oversight of advisers and managed investment schemes.
Trustees will be required to verify licensing, AFCA membership, regulatory history and “screen for adverse media” before onboarding advisers or licensees, meaning trustees will be required to monitor negative media coverage of advisers including ASIC notices or news publications that highlight negative practices from advisers.
There will be further expectations for trustees to have risk escalation tools including document requisition, adviser watchlists, the suspension of advice fee deductions, and the restriction of new business or offboarding of advisers.
Trustees will also be required to continue ongoing oversight focusing on monitoring of “concerning patterns” such as high volumes of rollovers, concentration of clients into illiquid investments and a high proportion of clients located in a different geographic region to that where the adviser is located.
The new standards were released as the government consults on a suite of new consumer protections which include stricter regulations for platform trustees.
Netwealth has come under pressure over the past year for its role in the aftermath of the Shield and First Guardian collapse and has remediated investors $100 million for hosting the latter fund after settling with the corporate regulator.
The agreement followed Macquarie’s $321 million settlement with ASIC. Equity Trusteesand Diversa Trustees are fighting allegations of wrongdoing in court.
Equity Trustees – which is the trustee for the NQ Super and DASH Super Simplifier platforms which held either fund – is a member of the FSC and will be required to lift standards, although it is currently in the process of selling its trustee-for-hire arm. Furthermore, Treasury’s consultation on new consumer protections may outlaw the “trustee-for-hire” model.
ASIC’s investigation into Shield and First Guardian has centred around the fund managers, advisers and lead generators allegedly complicit in having conflicted incentives to distribute the products, but the regulator has sought to hold the “gatekeepers” to account.
The due diligence and oversight capabilities of platforms and trustees have come under scrutiny in the wake of the collapse, and the regulator has sought to hold them accountable for failing in their “gatekeeper” obligations of protecting investors from poor managed investment schemes or misconduct of advisers.
InterPrac Financial Planning is being sued by the regulator for failing to have sufficient oversight of its advisers, which allocated $677 million of investor money to Shield and First Guardian, as well as being beneficiaries via increased revenue as a result of those activities.
Macquarie and Netwealth banned new business from InterPrac advisers last year in the aftermath of the collapse.
Since then, other major platforms who didn’t hold the funds – HUB24, AMP North, BT Panorama and CFS – also began halting new business from InterPrac advisers.
The blacklisting of advisers from the InterPrac licensee became a catalyst for the firm’s owner, the ASX-listed Sequoia Financial Group, to sell the struggling business which raised concerns from investors, the profession and the regulator.
