Ten per cent of advice files sampled by the Australian Securities and Investments Commission (ASIC) as part of its focus on the four big banks and AMP Limited gave rise to significant concerns about the impact of non-compliant advice on the customer’s financial situation.
The ASIC report resulting from the scrutiny of AM, ANZ, the Commonwealth Bank, National Australia Bank and Westpac pulls no punches with respect to the regulator’s ongoing concerns about the quality of advice, particularly with respect to superannuation switching.
Explaining its approach, ASIC said it had focused on both the make-up of approved product lists (APLs) within the major institutions and the quality of advice.
Discussing the 10 per cent of advice files about which it had significant concerns, ASIC said this was because clients had often been left worse off.
“We were significantly concerned because, for these customers, switching to the new superannuation platform resulted in inferior insurance arrangements and/or a significant increase in ongoing product fees—without additional benefits being identified that were consistent with the customer’s relevant circumstances,” the report said.
The report also noted that ASIC had found that in 75 per cent of the customer files it reviewed, including the 10 per cent about which it was greatly concerned, “the adviser had not demonstrated compliance with the best interests duty and related obligations”.
However, the regulator acknowledged that outside of the 10 per cent of files which were of significant concern, the remaining outcomes would not have necessarily left clients worse off.
ASIC said there were two areas, in particular, that led to a customer file being rated as not having demonstrated compliance with the best interests duty and related obligations—"that is, where the adviser had not demonstrated that they had:
(a) sufficiently researched and considered the customer’s existing financial
(b) based all judgements on the customer’s relevant circumstances.