Why are advisers and brokers being singled out? Asks the AFA

4 March 2020

The Association of Financial Advisers (AFA) has directly challenged the Federal Government to explain why financial advisers and mortgage brokers have been targeted in the wake of the Royal Commission rather than the major institutions.

In a submission filed with the Federal Treasury, the AFA has supported strengthening the breach reporting regime, but questioned why advisers and brokers have been targeted while others appear to have been let off the hook.

In doing so, the AFA has recommended that mandatory reference checking should be extended to other roles in the financial services sector, including within product providers, super fund trustees and also the management roles in financial advice licensees.

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The AFA also expressed strong concern over proposals to impose an obligation to breach report advisers working for other licensees and suggested that rather than making such an approach mandatory, it should be made voluntary via a direct contact line with the Australian Securities and Investments Commission.

The submission said the AFA was concerned that the Government’s legislation was unreasonably focused on financial advisers and mortgage brokers when mandatory reference checking could and should apply more broadly.

“Why is it only being implemented for financial advisers and mortgage brokers? If the reporting of people from another licensee is a good idea, then why has it not been extended to reporting other entities that are suspected of breaching ‘core obligations’? This reflects a common view that the Royal Commission identified issues at the institutional level,” the submission said. “However, the regulatory response is focussed at the individual level.”

“There are many expressing the view that this was not the outcome that was expected nor the outcome that should have eventuated from the Royal Commission. We also question some of the penalties that have been proposed for a failure to comply with these new obligations. In our view it seems remarkable that you could go to jail for failing to report a suspected breach by a financial adviser from another licensee.”

It was in these circumstances that the AFA said it believed that it was appropriate to extend mandatory reference checking to other roles in the financial services sector, including within product providers, super fund trustees and also management roles in financial advice licensees.




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"not the outcome that was expected nor the outcome that should have eventuated from the Royal Commission" …. not what the public or Adviser world expected but certainly what the industry heavyweights wanted to and demanded to happen post RC. Govt by Royal Commission what a cop out.

Why is this a cop out? The commentary here is spot on. Most of the problems we saw at the RC were at the AFSL Management level - as revealed in the witness box no less. What more does it take?
The AFSL in most cases could not adequately oversee Advisers. Management also had their own selfish agenda - BIG salaries and bonuses. Very little has changed.
How is it possible that a person with no advice experience, often no business degree, a 4 subject DFP or no FP quals at all, not on the FAR and not sitting the FASEA exam can oversee Advisers? Very big structural issue there which perpetuates the problems.
Sure there are a few bad Advisers but not many as a percentage. The impact of instances of poor advice pales in comparison to the structural weakness and continuing damage done by hopeless "Execs" who are asleep at the wheel. Until they are removed expect to see a substantially unchanged industry.

Sounds like I wasn't clear - the outcomes of the RC favour the instos - they looked lime they took the heat during the hearings but the recommendations and moreseon the interpretation of them by the legislators impact the adviser much much more.

Yes, clearly that is the case

What i still find amazing is that a backpacker working for one of the JUNK INSURANCE providers like Real Insurance can sell Life/TPD/Trauma/IP/BE insurances without any training or qualifications, no statements of advice, no need to adhere to best interests duty, no need for professional indemnity insurance, no ongoing CPD points, no ASIC levy fee, WHILST STILL GETTING PAID THE SAME COMMISSIONS as an adviser who is required to do all these things.

Either allow all insurances to be sold with no consumer protections or force everyone to adhere to the same set of rules and education levels that advisers have to adhere to.

You would think that the untrained sales reps who dont hold insurances would have to do more compliance and if you ask anyone who should be forced to jump through all the hoops, a registered adviser with years of training and a universtity degree, or a backpacker forking at a call centre and i can guarantee you everyone will say that society needs more protection from the backpacker at the call centre than their educated and insured financial adviser.

The current regulatory environment is all about adviser persecution, not consumer protection.

It is about scapegoating and cheap headlines, not responsible policy.

We are being targeted because it is the easiest road to take and because they well know the health and mental health of advisers is suffering at unprecedented levels which makes them vulnerable.
Advisers have the Govt against them and the now the product providers whom have greatly benefited from advisers placing their clients business with them are now turning against them.
There is no loyalty, no empathy, no consideration and no common sense in respect to the massive over reach of legislation and regulation.
Not only is the volume of legislative change unprecedented and near impossible to deal with, they apply it all at the same time to maximise the impact on advisers.
This is a strategic and targeted assault by a regulator drunk with power and in a feeding frenzy and a Govt that is crucifying and destroying small business advisers because in order to win an election and off the back of the royal Commission, the Govt agreed to anything and everything without adequate consideration of the consequences.
This Govt will be known as the Govt that destroyed the financial services industry in one term.
It is an absolute disgrace.

We have been singled out because we are the easiest target, without the political clout (read dollars) of the big institutions.

Sort of. It's just easier to lump you all together and smash you, based on evidence of a few bad Advisers, than to deal with the structural AFSL issues. "The truth is like poetry...and most people f$#king hate poetry".

NO, we are being targeted because everyone thinks we are dumb and can't stand up for ourselves. well we can't because we haven't got the resources to stand up. I don't know why the FPA is keeping $10m in cash for. it's wartime. spend it.

on the other hand, the guilty party has 200 -1,200 leeches (lawyers) on staff and they have the ability to defend themselves via costly litigation. and, no matter what the issue they find a way to pin it on the adviser or broker who is, for the most part, a small business and defenseless.

we can't even unite as an industry, so it goes on and on. pointless regulations that serve no one and is of no value to consumers although purported to be so.

Until we start to violently fight back using all our combined resources, naming and shaming and publicly humiliating public officials, executives from ASIC, executives from institutions and put our own positive narrative out there in the mainstream media. the beatings will continue.

in fact, I am expecting it to get a lot worse.

here is one example, of how it could get worse, some may think this is extreme and totally nuts, but be warned I told you so.

soon, we will have to have SoA and RoA presentation ceremonies, clients and those who may be impacted by the broad effects of our advice will need to be sent a formal (printed) invite to these ceremonies to be held at town halls or local venues which should be readily accessible, and at a reasonable cost so that those affected by our advice or could be reasonably expected to be so, are not prevented from attending.

if they do not attend, you MUST file note the reasons why they didn't attend. personal holiday and other things of this nature are not legitimate excuses. a legitimate reason might be the sudden illness of either the person or immediate relatives, that prevents them from attending THAT could not be reasonably foreseen. Just because they are on a death bed and cannot attend is no excuse if you know that person is on their death bed you must make provisions for a live webcast so that person can view the presentation on their death bed and assess the impact of our advice.

even if a legitimate reason exists and they cannot attend, you must have taken steps to be reasonably satisfied that it is legitimate, and to that end, you should record the steps you took - doing all things necessary - and how you satisfied yourself of the legitimacy of the excuse, for example, you got a letter from the oncologist treating the would-be affected person that they have a terminal diagnosis.

there must be pomp and ceremony all parties involved in the value chain must appear, the AFSL licensee, the paraplanner, the admin person, the financial planner and then they must present the SoA in unison in a certain tone.

you think i am nuts. it's gonna happen soon. it's got about 12 to 18 months before it happens.

if you don't think so, here is the process to charge a client a fee now, initial quote, followed by a service agreement, followed by an SoA with the invoice, followed by an FDS, together with an Opt-in. then an fds and opt-in, and invoice and fds opt-in and invoice forever and ever.

what other fucking degree qualified fucking professional does this when they charge a client a fee.

so, brace up my friends. it's going to get a lot, a lot worse as we are just monkeys dancing to someone's tune.

Your not nuts, the process is nuts. I cant speak for ASIC but being audited for "Fee for not service" when service is excluded, audit goes back to 2008, ASIC website, my ASFL, and ASIC evidence at the "Royal" Commission states 7 years record keeping. Violet Wong said she spoke to said ASFL to maintain records but ASIC commissioner also gave evidence at RC that notes are not kept of meetings so I guess we ASSUME she is telling the truth, which I believe puts Commissioner in deep for giving evidence that 7 years is it for records. And I'm the one doing bloody ETHICS?

you're correct, ASIC has decided the big banks/aligned/ and other dealers must pay $$ so take them back outside the 7 years where they know no records exist and they know that to preserve reputation and the license itself they will rather just pay compensation. This is greenmail of a form. Of course, the banks and others than turn to their small practitioner members and say sorry guys we tried but its you who have to cough up, even though we monitored you and told you no worries for 10 years. And, we've already provisioned the loss, so anything we get back from you guys is going to be earnings positive for us! No wonder they have thousands trying to get $$ back from small advisers.

With the constant and manic focus on the requirement to study ,sit and pass ethics exams and complete ethics modules, what we are really effectively being told by the Govt is that advisers are unethical.
We are guilty until proven innocent with no limited liability to hide behind like the Accountants have and unethical until we can prove we can sit an exam which will tick a box to state we are now ethical.
This is discrimination of a specific industry and group.
This is targeted persecution.

As a Mortgage Broker, we're seeing a clear divide between what lenders require of a Broker versus far lower requirements placed on their own staff.

Every day we're seeing posts from Brokers who have responsibly informed a client that they don't qualify, generally due to insufficient income, only to hear that the client walked into a Bank branch and got an approval on the spot. These are clients who clearly fail policy or servicing requirements of a particular lender but this same lender approves the deal when lodged by bank staff.

Not only are they overriding large policy deficiencies but we're hearing regularly that the bank staff are completing no analysis of needs, goals or risks and no analysis of living expenses.

makes sense and adds to the theory the big banks have squeezed the regulatory gaming, they are masters at it. Move on from advice, make the regulations a nightmare for small business, customers walk back to them with open arms. Pay out a few billion this year, peanuts compared to the $10b or so they've made every year for the past 10. Reputational damage? Who cares, they show moves on and people forget until next time.

Go back 100 years, have governments ever answered these kinds of questions?
They do what they want, those negatively effected have legitimate questions and they're never answered. This won't be any different, it will all be forgotten and in 10 years time no one will care, no one will remember. and there'll be a few old ducks left whining "back in my day even working class families could afford financial advice!"

Mr Hayne, why did you let Industry Funds sail through the RC? Is it true that the aim of the game was to eliminate us so union funds own the space? A trolley pusher on the phone at Australian super can give advice without an SOA How does that work?

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