Misrepresentation regarding licences

The Boutique Financial Planning Principals Group (BFPPG) is calling on both the AustralianSecurities and InvestmentsCommission and the FinancialPlanning Association to crack down on what it claims is the widespread practice of authorised representatives posing as Australian Financial Services licensees.

Its move has been prompted by swift remedial action taken last week by the Financial Planning Association (FPA) in response to allegations by two BFPPG executive members of illegal marketing practices by an FPA member.

After an FPA investigation into allegations by Puzzle Financial Advice principal Bruce Baker and Ferguson Betts principal Rob Ferguson, the FPA member was reportedly ordered to amend its website.

Brisbane-based Baker and Ferguson alleged the member’s website gave a false impression that the FPA member was an Australian Financial Services (AFS) licensee rather than an authorised representative of an AFS licensee.

They argued that in doing so, the FPA member was in breach of rules 103 and 104 of the FPA’s code of conduct, as well as the Corporations Act as amended by the Financial Services Reform Act.

The pair, both of whom head-up independently owned practices that are AFS licensees, welcomed the FPA action against the “breach of conflicts of interest” legislation.

However, they allege widespread breaches are occurring within the industry — across the full range of marketing material, including Financial Services Guides and Statements of Advice — due to a lack of rigorous policing of the legislation.

They described the breaches as a “longstanding issue” among the BFPPG’s 52-member practices as well as among other non-aligned principals of independently-owned practices with AFS licensees.

The prevailing belief among them is that some representatives are downplaying a link to their licensees and product providers to take advantage of a consumer trend for independently owned advice.

“Our view is there are lots of practices out there that are authorised representatives, particularly of a product provider, which are not making it very clear who owns them,” Baker said

Ferguson said his practice “had taken the risk of becoming an AFS licensee, with legal responsibility for our advice, in exchange for being able to offer our advice under our own name”.

“My argument is nobody be given the same level of flexibility when they are actually a part of a big group without any responsibility for the advice.

“After all, I’m in competition with these authorised representatives, and my competitive edge it is that I’m an independently-owned practice.”