The Libertas mistakes that caused AFSL cancellation
Libertas Financial Planning saw its Australian financial services (AFS) licence cancelled this month after the Compensation Scheme of Last Resort (CSLR) paid out compensation to a victim; details have been shared on the complexities of the complaint.
With Libertas unwilling to pay the compensation, it fell to the CSLR to make a payment to the victim. This meant the AFSL of the business had to be cancelled by ASIC and is the first time since the scheme’s implementation that this has taken place.
Libertas was put into liquidation in May 2023 and applied to exit the Australian Financial Complaints Authority (AFCA) in June 2024, the outcome of which will be considered at AFCA's next board meeting on 5 September.
The compensation paid by the CSLR related to a determination made in July 2023 after an individual received personal financial advice from a Libertas authorised representative (AR) in May 2016. The AR advised him to take out term life, total and permanent disability (TPD) and income protection (IP) policies with an unnamed insurer through a superannuation account. The individual argued this was not appropriate as he lived and worked overseas and did not intend to return to Australia.
He also argued no annual reviews were provided and he sought a refund of IP premium and all adviser fees.
AFCA determined that while the original advice was appropriate, the adviser failed to make adequate ongoing enquiries into his circumstances regarding whether he intended to return to Australia and any ongoing annual reviews provided were “not fit for purpose”.
This failure to provide appropriate advice caused the individual to suffer a loss and called for Libertas to return the advice fees to his super account.
“The outcome is fair because it requires the financial firm to compensate Mr C for losses he incurred as a result of Mr M’s failure to provide appropriate advice in May 2018. It is also unfair for the financial firm to retain the benefit of ongoing advice fees where the ongoing advice was not provided or otherwise not fit for purpose,” AFCA said.
“Mr C’s superannuation statements show that $4,002.74 was withdrawn each year to pay for the inappropriate income protection policy. A total of $18,012.33 was withdrawn from Mr C’s superannuation account to pay for the inappropriate IP cover from 1 July 2018 to 31 December 2022. Had these premiums not been paid from Mr C’s superannuation account, his superannuation balance would have been better off by $17,766.96.”
It called for Libertas to pay:
- $17,766.96 plus interest equal to the change in the CPI from 1 January 2023 to the date of payment.
- $4,670.81 plus interest equal to the change in the CPI from the date of this determination to the date of payment.
With no forthcoming action from Libertas, the CSLR paid the individual. It then notified ASIC of its actions which required ASIC to cancel Libertas’ AFSL.
AUTHOR
Laura Dew
Recommended for you
Compared to four years ago when the divide between boutique and large licensees were largely equal, adviser movements have seen this trend shift in light of new licensees commencing.
As ongoing market uncertainty sees advisers look beyond traditional equity exposure, Fidante has found adviser interest in small caps and emerging markets for portfolio returns has almost doubled since April.
CoreData has shared the top areas of demand for cryptocurrency advice but finds investors are seeking advisers who actively invest in the asset themselves.
With regulators ‘raising the bar’ on retirement planning, Lonsec Research and Ratings has urged advisers to place greater focus on sequencing and longevity risk as they navigate clients through the shifting landscape.
