The Commonwealth Financial Planning (CFPL) scandal which led to a Senate inquiry into the actions of the licensee and the Australian Securities and Investments Commission (ASIC) should stand as a lesson for the entire financial services sector, according to Senator Mark Bishop.
Senator Bishop is the chair of the Senate Economics References Committee (SERC), which conducted a review of the performance of ASIC in relation to the actions of CFPL between 2006 and 2010. The SERC handed down its report last week, calling for a Royal Commission to further examine the matter.
…the evidence the committee has received is so shocking…
“This is not a recommendation that the committee has made lightly, but the evidence the committee has received is so shocking and the credibility of both ASIC and the CBA is so compromised that a Royal Commission really is warranted,” said Senator Bishop.
“The CFPL scandal needs to stand as a lesson for the entire financial services sector. Firms need to know that they cannot turn a blind eye to rogue employees who do whatever it takes to make profits at the expense of vulnerable investors.”
The report delivered 61 recommendations, generally aimed at enabling ASIC to fulfil its responsibilities and obligations more effectively, and to promote greater confidence in the regulator. To read a summary of the SERC report, click here.
Responding to the report, ASIC Chairman, Greg Medcraft, said the regulator would not comment on the policy recommendations, which are directed to the Government, but had taken the inquiry very seriously.
However, Mr Medcraft noted that some of the recommendations relating to ASIC’s procedures had already been addressed, including:
- The way ASIC handles whistleblowers
- The increased transparency of ASIC’s processes
- The way ASIC monitors enforceable undertakings
“We also note that some recommendations – such as registration of financial advisers, raising adviser standards, higher penalties and a user pays funding model – are issues ASIC has suggested in its submission to the Financial System Inquiry,” Mr Medcraft said.
“ASIC will continue to do the best job we can with the resources we have. And we will achieve this through our excellent staff – the men and women who work here for good reason, and that is because they believe in the public interest,” he added.
We deeply regret that some of our financial advisers did not provide quality advice to customers
The Commonwealth Bank Group (CBA) also acknowledged the release of the report, reiterating its apology for the past events occurring within CFPL and Financial Wisdom (FWL).
‘We deeply regret that some of our financial advisers did not provide quality advice to customers, some of whom had trusted and banked with us for decades. We have no tolerance for behaviour that prejudices the financial wellbeing of our customers,’ the CBA said in a statement issued on 26 June.
‘Our primary focus has been putting our customers into the position they would have been in had they received appropriate advice. We acknowledge that for some customers this took time. In addition to looking after our customers we have been transforming the business to ensure these issues do not re-occur.’
CBA said that CFPL was now a ‘significantly transformed business’, having undergone structural, cultural and management changes. The group refuted Senator Bishop’s assertions that CBA’s credibility was so compromised that a Royal Commission into the scandal was warranted.
‘The Group takes very seriously the past events in CFP and FWL. The Group has worked openly and transparently with the Senate Committee and ASIC throughout the inquiry,’ the CBA said.
Association of Financial Advisers (AFA) CEO, Brad Fox, said the Association condemned the inappropriate advice behaviours identified in the report.
“The trust of consumers has been breached and that is simply not good enough,” Mr Fox said. “Some of the recommendations in the report are consistent with our views on what is required to further the evolution of financial advice into a trusted profession.”
Mr Fox said the advice market must treat the release of the report as a pivot point from which to rebuild consumer trust in financial advice.
“Thankfully, over the past five years significant momentum has been built toward professionalism in advice. This must continue so we never see these types of issues arise again.”
He said the Association would consider the detail contained in the report and subsequent recommendations to assess whether or not they are likely to be effective in stamping out inappropriate systemic behaviours.
“What is most important is that we move forward with even more vigour towards building a universal culture of professionalism that earns the respect of the community,” Mr Fox concluded.
The Financial Planning Association (FPA) said the report further underscored the need for an efficient co-regulatory model with approved professional bodies handed greater powers of monitoring and supervision of all financial planners/advisers.
“The evolution of fnancial planning as a respected profession is critical in providing a consumer-centric approach to reforms befitting our professional members,” said FPA CEO, Mark Rantall.
Mr Rantall said the SERC had unanimously accepted all of the recommendations contained in the FPA’s 10 point plan (see: FPA Releases 10-Point for Future Advice Framework).
“We are pleased that the inquiry has included all of the FPA’s recommendations in their final report,” he said. “The FPA is committed to stamping out inappropriate advice outcomes rooted in complex product distribution and conflicted remuneration practices, while offering viable solutions based on what is right about appropriate financial planning.
“In terms of education, the heart of our published 10-point plan is to phase in appropriate degree qualifications for new financial planners over five years together with membership of approved professional associations with approved codes of professional conduct. We are pleased that the committee has seen fit to adopt this recommendation.
“The days of completing a $2,000 two week course to be licensed to provide personal financial planning advice should be long gone,” Mr Rantall said.
Pretty shallow for an employer, who sets the standards for its employees to blame the latter when the employer gets caught out! How gullible are these committee members? And how gutless CBA?
Interested to know how many CBA employed planners were members of FPA or AFA and hold CFP status?
Seriously, are we advocating degree qualifications for honesty, integrity, ethics & trust, plus legislating “client best interest”, if this is about formal education rather than values, we are in heaps of strife??? Shockingly self serving rhetoric….after 40 odd years in the industry I observe this from a sort of ” helicopter” view of a politicized version of what we haven’t learnt.!! Yep, we have a “crisis in confidence”!!
perhaps banks should have stuck to banking only. the culture of financial planning is to do the right thing by the client and everybody wins do banks understand this ?
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