The Australian Securities and Investments Commission (ASIC) was right when it issued a warning to financial services licensees to ensure they have “robust recruitment processes” in place when appointing people who have previously worked for financial services businesses which have been the subject of regulatory action.
The ASIC warning would, however, have been more effective if it had gone more pointedly to the heart of the issue by declaring that an enduring problem for the industry is that the provision of bad advice can endure long after a company has lost its Australian Financial Services Licence (AFSL) because bad planners can simply move to another licensee.
In these days when some dealer groups are facing administration, others are amalgamating and still more are seeking to develop new, more viable business models, scale and distribution have become commercial imperatives and recruitment due diligence has become less exacting.
That is not to suggest that any planner affected by regulatory action against his/her licensee should be tarred with the same brush.
They should not. But good risk management should oblige those employing such planners under a new licence to do their homework to ensure they are not importing a problem.
There has been much discussion about the emergence of financial planning as a profession and, more recently, about the manner in which planners have struggled to improve public perceptions of their calling.
Indeed, a recent Roy Morgan Research survey suggested the standing of financial planners had actually gone backwards in the past 12 months.
At least a part of the problem for planners is that the degree to which the industry is able to rid itself of bad apples is compromised by a lack of detail around the precise reasons for ASIC acting against a planning group, and the relative ease with which planners can move between licensees.
Notwithstanding some of the grandiose ambitions of ASIC chairman Greg Medcraft with respect to his organisation’s capacity to extend its jurisdiction, the reality for the regulator is that it is hard-pressed to perform its current functions and is clearly not equipped to identify the good, the bad and the ugly with respect to the individual planners.
As convenient as it might be for licensees to be able to scan an ASIC register of approved planners, the reality is that the regulator cannot provide this facility and that licensees must do their due diligence to ensure that they filter out problems before they occur.
ASIC is not asking licensees to do anything other than their jobs.
