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Financial services licensees must stop the merry-go-round of bad advisers in the industry, according to Millennium3 Financial Services executive director Sean Graham.
Graham warned that by allowing advisers who fall short of compliance and advice requirements to simply move between businesses unchecked, the industry was failing to add substance to the rhetoric of ‘weeding out the bad apples’.
Millennium3 recently won a court case brought by one of its former authorised representatives, Avoca Consultants, which was ejected from the group after failing to meet its advice requirements. Millennium3 referred the breaches to the Australian Securities and Investments Commission and fought the case in the Federal Court. But its response was not one commonly seen across the industry.
“We spent a lot of time, money and energy in fixing it and addressing those issues,” Graham said.
“I suspect there may be a lot of similar examples across the industry that never go to court, because who wants the bother of a court case or the potential interest that comes with it?”
Graham acknowledged there are fears and concerns associated with taking a stand, including costs that could be incurred, reputational issues and the possibility of increased regulatory and media attention.
“I suspect the tendency is to just let people move on and get rid of the problem. But if you’re never addressing process failures or inappropriate behaviour and you’re allowing people to resign and go somewhere else …[then] we’re just allowing those problems to migrate,” Graham said.
He said the recent court case had highlighted that “when you find clients who are disadvantaged, who have suffered because of non-compliance … the licensee has an obligation to do something about it. In a lot of organisations I think they’d handle it differently.”
But despite there being “simpler and more commercial ways to solve the problem”, Graham argued if the industry is serious about quality advice and professionalism, “we have to observe our professional obligations”.
Graham said the court case highlights and reinforces the responsibilities of a licensee to the clients of its advisers, and challenges the opinion that the adviser/licensee relationship is simply a service relationship.
“An adviser is not just buying a service. It’s not something transactional; it’s almost like a trustee relationship because you’ve got an obligation to their clients,” Graham said.
