Top failures of 2013 - AAA Financial Intelligence

2013 was another eventful year for the financial services industry. In its annual top 5 feature, Money Management looks at some of the most memorable moments of the last 12 months.

AAA FI: How not to do it

Throughout the year, ASIC executives repeatedly used AAA Financial Intelligence (AAA FI) as an example of how not to run a financial planning dealer group.

AAA FI and AAA Shares had their licences cancelled by the regulator in February this year, with the then ASIC Commissioner Peter Kell pointing to their “appalling record” that put at risk the quality of advice provided to clients.

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AAA FI failed to manage its conflicts of interests, did not adequately train and monitor its advisers, nor did it have adequate human resources to properly identify its representatives.

Furthermore, the dealer group also failed on the compliance front, all of which eventually lead to its demise.

Financial woes strike AFS Group

AFS Group is another dealer group which collapsed this year, but unlike AAA FI, it was wound up due to financial struggles.

After key financial planning practices left the group and joined a number of large institutions, AFS Group experienced severe revenue pressures which required it to enter into voluntary administration.

However, the troubles didn’t end there. A battle soon erupted over the administrator’s decision to freeze the brokerage account holding more than $1 million in unpaid commissions for AFS Group planners.

Labor Govt’s super and tax proposals

When the Liberal Party took office earlier this year, one of the first announcements the new Treasurer Joe Hockey made was to scrap 92 pieces of announced but unlegislated tax and superannuation measures by the former Labor Government.

This included the scrapping of the proposed 15 per cent tax on superannuation pension earnings over $100,000.

The financial services industry broadly welcomed the move, with Financial Planning Association chief executive Mark Rantall saying halting the tax measures was positive news for the financial planning community and beyond.

Financial Services Council CEO John Brogden said the proposed tax was “rushed, complex and frankly, unworkable”.

Enshrinement loses political race

In November last year, the former Minister for Financial Services and Superannuation, Bill Shorten, released draft legislation to prevent anyone who is not a qualified financial planner or financial adviser from telling consumers that they are.

The enshrinement of the term ‘financial planner/adviser’ into law was a rare measure that was broadly supported by the industry and one heavily lobbied for by the Financial Planning Association.

Things were looking up for this proposal in the first half of the year, with the Parliamentary Joint Committee recommending the measure.

However, it failed to make its way into the Senate to pass the Parliament before the election was called, effectively losing the race with the political clock.

Churn debate goes missing

The Financial Services Council announced earlier this year that it was looking to re-open the debate around churn after its proposed framework fell through in 2012.

However, the industry hasn’t heard anything from the Council regarding churn since June, with the advice community and insurance companies continuing to bicker about where the blame for increased lapse rates should be shifted.

ASIC recently announced wide-ranging surveillance of risk advice provided to consumers, which some interpreted as a preparation to act on churn.

Whatever might happen, it is fair to say no progress has been made with regards to finding a solution to this problem.




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