While recent enforcement action by the Australian Securities and Investments Commission (ASIC) and the Royal Commission have largely focused on the major banks and AMP, it would be foolhardy for non-bank advice firms to think that they are not the next focus.
According to the Fold Legal’s Claire Wivell Plater, ASIC’s modus operandi is to first investigate potential regulatory issues within big targets, where misconduct is widespread, and evidence is easy to find.
However, by the time that work is nearing completion, ASIC has a template for investigating smaller players, she says.
“They know what to look for, where to find it, what questions to ask – and they have a standard methodology for doing so,” Wivell Plater says in The Fold Legal blog.
“If ASIC finds breaches which haven’t been voluntarily reported, enforcement action will follow, as night follows day.
“In the second half of 2017, ASIC’s enforcement actions resulted in criminal penalties, civil remedies, enforceable undertakings and administrative action, demonstrating the breadth of its powers. Indeed, ASIC has banned over 100 financial advisers in the last three years alone.”
So, Wivell Plater says there are six areas that non-bank financial planners, accountants and life advisers should be looking for in their businesses. These include:
- Charging fees for no advice;
- Life insurance churning and inappropriately recommending super money be used to pay for life premiums;
- Failing to consider whether clients’ existing products will meet their objectives before recommending replacement;
- Inappropriately recommending self-managed super funds;
- Recommending services that clients don’t need or don’t value; and
- Recommending in-house financial products to generate extra revenue when there’s no additional benefit for the client.
