Report 515 shows disconnect between licensee rhetoric, action

Simon Hoyle


March 24, 2017

On page 15 of the Australian Securities and Investments Commission (ASIC) Report 515 Financial Advice: Review of how large institutions oversee their advisers, there appear five paragraphs that should anger and dismay every single financial planner working today.

In these relatively short paragraphs, ASIC describes vividly the failure of institutions – the four big banks plus AMP – to vet, monitor and discipline their advisers.

It exposes as hollow the platitudes that institutional owners of licencees have mouthed over the years about raising standards and “doing the right thing”. Reading the report, it seems clear that while these institutions continue to get away with the things they do – and continue to allow their advisers to get away with what they do – the dream of a financial planning profession in Australia is doomed.

“All of the institutions publicly state that their core values include being customer focused, ‘doing what is right’ for customers, and acting with integrity,” the ASIC report states. “Our concern is that, despite these stated values, many of the institutions we reviewed did not ensure that their internal processes consistently supported the value of ‘doing what is right’ for the customer. Many of the failings we identified led, or had the potential to lead, to poor outcomes for customers.”

ASIC cites three specific examples where institutions fail to live up to their big talk: information sharing, background and reference-checking, and audits.

The report states that when institutional licensees know an adviser is bad, they routinely fail to inform ASIC, or the licensee the adviser has subsequently moved to, and therefore fail to protect future consumers from that adviser.

When institutional licensees recruit an adviser without checking references, bad advisers are able to circulate within the industry, continue to be seriously non-compliant, and increase the risk to new clients.

And when clients receive poor advice, the licensees can’t tell if the advice meets the adviser’s best-interests duty or other obligations, clients are not properly identified and remediated, and the providers of the poor advice get away with it.


Come out, come out …

Consider this, too. As part of ASIC’s review, it “directed the institutions to identify and provide information about their advisers whose past conduct had been identified as non-compliant”.

The institutions coughed up a total of 185 advisers as a result. The figure was 149 at the start of the review but as ASIC continued, the institutions “found” another 36 advisers with “serious compliance concerns” – so-called “SCC advisers”.

Of this 185, ASIC already knew about 101 – having already banned 26 and engaging in ongoing surveillance or an investigation into 75 others. That means there were 84 SCC advisers with whom the institutions themselves had serious concerns that had not been breach-reported to ASIC.

“We reviewed the breach reports and other notifications provided to ASIC by the institutions since 1 January 2009,” the ASIC report states. “From the information held on our registers, and information provided to us by the institutions, it was apparent that reporting practices varied, with some of the institutions notifying ASIC more often. However, nearly half of the SCC advisers were not notified to ASIC until the licensees identified and reported their SCC advisers to us in response to our direction.”

So, to paraphrase: the institutions covered in the report don’t know what their advisers are doing. If they do find out, they typically don’t (or can’t) do anything about them; even if they do find out they don’t know how, or if they should, compensate clients; and if by some miracle they detect poor advice, confirm it’s non-compliant and actually do something about it, they don’t tell anyone else about the offending adviser.

The roots run deep

The temptation is to believe that the problem is confined to five institutions. But we know better than that. The institutions’ roots run deeply into the body of the financial planning industry. The entities the report covers own and control 35 separate licensee businesses, most of which operate under brands that the average consumer wouldn’t associate with the parent company – the list appears below.

The report states: “Where there are systemic failures in an organisation, the culture of that organisation is very likely to have been a contributing factor. The information we gathered for this report suggests to us that cultural factors in the institutions contributed to the failures we observed.”

Reading the report, it’s difficult to understand just what industry the institutions think they’re playing in. And it’s even more difficult to see what constructive role they might play in the development of a financial planning profession, when their ingrained and apparently inviolable cultures are so obviously anathema to a profession and to professional services firms.

Licensee businesses the big 4 banks and AMP own

AMP: AMP Direct; AMP Financial Planning; Charter Financial Planning; Forsythes Financial Services; Genesys Wealth Advisers; Hillross; ipac Securities; King Financial Services; PPS Lifestyle Solutions; Prosperitus; Quadrant Securities; SMSF Advice; Strategic Planning Partners; TFS Financial Planning; Total Super Solutions; Tynan Mackenzie.

ANZ: Australia and New Zealand Banking Group; Financial Services Partners; Millennium3; RI Advice.

CBA: Commonwealth Financial Planning; Financial Wisdom; BW Financial Advice;
Count Financial; Commonwealth Private; Commonwealth Securities.

NAB: GWM Adviser Services; Apogee Financial Planning; Godfrey Pembroke; Meritum; JB Were; National Australia Bank.

Westpac: Westpac Banking Corporation; Securitor; Magnitude.

Source: ASIC Report 515 Financial Advice: Review of how large institutions oversee their advisers



TOPICS:   AMP,  ANZ,  asic,  Commonwealth Bank,  licensees,  NAB,  Report 515,  westpac

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