ASIC’s adviser reference-checking protocols potentially ‘prejudicial’
The Australian Securities and Investments Commission’s (ASIC) proposed reference checking protocol is prejudicial to the interests of financial advisers because it exposes them to potential retribution or serious harm from their existing employers when they seek to switch licensees.
The Stockbrokers and Financial Advisers Association (SAFAA) has responded to ASIC’s release of a discussion paper on the reference checking protocols by claiming that it contained “a fundamental defect”.
“There was a fundamental defect in the framework in that it compelled the hiring licensee to request information from the adviser’s current employer,” it said.
“There is a real risk that this can expose the adviser to retribution or serious harm from the existing employer, if they were so minded.
“The fact is that not all employers will look favourably on an adviser seeking to leave their current position. Some employers may adopt a vindictive approach as soon as they become aware, and the adviser may suffer some form of retribution or dismissal.”
“Firms may not always be motivated by ill-will, but in the case of advisers with a client base, a firm may view the prospective departure of an adviser, who may seek to take with them the clients they had been servicing, as a potential threat to their business, requiring steps to minimise any potential threat,” the SAFAA response to ASIC said.
“In the case of advisers who are currently not employed, these risks may not be great; however, the likelihood more often than not is that advisers will be looking to move while they are currently in employment. It is natural for any employee to look for opportunities that might be more rewarding, and is it is also not uncommon for approaches to be initiated by other licensees looking to attract good advisers to change firms.”
The SAFAA letter to ASIC said the organisation’s preferred position was for a central source of information about the compliance record of an adviser which was capable of being checked not only by prospective employers but also potentially by members of the public.
It said such a model was in use in the US.
Recommended for you
Financial advisers and wealth managers need to exceed their clients’ desires for personalisation, a new EY report writes, and the requirements for this will vary between client segments.
Betashares chief executive, Alex Vynokur, believes technology advancements will enable banks to return to financial advice in the future as the need for advice is greater than ever.
Centrepoint Alliance has upgraded its expected financial results for FY24, thanks to strong adviser recruitment and the acquisition of Queensland advice firm Financial Advice Matters.
The corporate regulator has permanently banned a Melbourne-based financial adviser that “dishonestly attempted to induce clients to transfer their superannuation into a bank account he controlled”.
