The Australian Securities and Investments Commission (ASIC) has imposed license conditions on Guardian Advice, due in part to advice deficiencies uncovered through its recent retail life insurance advice review.
The regulator has confirmed that Guardian Advice was one of the firms included in the review, as well as being subject to surveillance following the group’s appointment of a number of ex-AAA Financial Intelligence representatives in 2013 (see: AAA License Cancelled Due to Inappropriate Insurance Advice). However, the regulator advised that its surveillance was not confined to advice from ex-AAA representatives or life insurance advice, saying it had conducted a broad surveillance across the business looking at advice from a number of representatives and at a number of features of Guardian Advice’s business.
Through this surveillance, ASIC said it had found instances where there was not a demonstrated reasonable basis for the advice provided by Guardian Advice representatives, and that it had also uncovered examples of advice files that did not contain evidence that the advice given was in the best interests of the client.
In addition, ASIC said it was concerned that Guardian Advice did not have adequate arrangements in place to ensure it was complying with its general obligations as an Australian Financial Services licensee. Specifically, ASIC was concerned that Guardian Advice did not:
- Properly assess and monitor its representatives’ competence to provide financial services
- Have adequate measures in place to meet its record-keeping obligations
- Adequately respond to identified breaches by its representatives
- Have in place adequate human and technological resources
Under the license conditions imposed by ASIC, Guardian Advice must appoint an ASIC-approved independent consultant to review its compliance with its general licensee obligations and develop a plan to rectify any deficiencies identified by the expert. The expert will report regularly to ASIC over the next two years on Guardian Advice’s implementation of the plan.
ASIC Deputy Chairman, Peter Kell, said: “The weaknesses in Guardian Advice’s systems and controls show that there was an ongoing risk that unsuitable advice could be provided by Guardian Advice and its authorised representatives.
there was an ongoing risk that unsuitable advice could be provided by Guardian Advice and its authorised representatives
“This outcome underlines ASIC’s strong commitment to lifting standards in the life insurance sector. When we come across instances that raise issues for the confidence consumers have with advice, we will take action.”
Mr Kell also acknowledged the cooperative and constructive approach of the dealer group in response to the concerns. He said the regulator’s investigation was ongoing, and that ASIC was considering whether further enforcement action, such as banning individual advisers, was required.
When releasing the ASIC report into retail life insurance advice last year, Mr Kell said that where issues had been identified, the regulator would work with the relevant licensee to address its concerns. Guardian Advice is the first licensee to have been identified as participating in the review.
A spokesperson for Guardian Advice said ASIC’s surveillance had commenced on 23 September 2013, and involved consideration of the implementation of policies and procedures, advice, recruitment, adviser audit and training.
“ASIC found a number of improvements that could be made and additional licence conditions have been introduced, which will be overseen by ASIC and includes the appointment of an independent expert to complete a review of the Guardian Advice business in these areas,” the spokesperson said.
“Guardian Advice takes ASIC’s findings very seriously and we are working with ASIC to ensure the necessary improvements are implemented by the business.
Guardian Advice takes ASIC’s findings very seriously
“The life insurance and advice industries are undergoing widespread reform and Guardian Advice accepts that it is appropriate that there is greater scrutiny of these industries.
“Guardian Advice is confident it can seize this opportunity to improve our business, including improvements in adviser recruitment, training and adviser audit processes.”
In the same week, Suncorp Life, the parent company of Guardian Advice, announced that Executive General Manager Distribution, Jordan Hawke, would be leaving the company (click here for more). Guardian Advice’s spokesperson said they could not speculate on whether the two announcements were linked, but believed they were unrelated and that Mr Hawke’s decision to leave Suncorp Life was a personal one. Mr Hawke was not available for comment.
Our “friends “,( or is that fellow travellers ) hinted last week, in an obvious pre-emptive attack on small AFSLs, that small Licencees would not have adequate financial resources t o conduict business
The FSC of course has an agenda to protect the vertically integrated product-distribution model used by most of their members
But ASICs report clearly says Suncorp, owners of Guardian, was not devoting sufficient resources to meeting the MINIMAL resource requirements of an AFSL.
For years there have been rumours that most AFSLs owned by product manufacturers are not profitable. The Suncorp exercise would tend to support that idea.
Its not working !! Time to completely separate product from distribution, but without an ISN agenda.
Fact: About 14/15 years ago Suncorp were under an enforced undertaking, and had to swim against the tide to retain their AFSL with external intervention to bring their compliance up to standard.
This process took 2 or 3 years before the AFSL was restored based on changes they made to their FP practices throughout the bank, compliance procedures were put in place, with appropriate advice, SOA’s less than 60 pages and selling internal product with the highest KPI’s was frowned upon. Planners at all levels had high benchmarks or would be sacked based on not achieving KPI’s.
Seemingly, they like to swim close to the flags, or where the lifeguards don’t watch. Again a Suncorp association with poor planning/product flogging advice model that comes back to their in-house product. This time the challenge is public.
This is not new, has always been the practice to get away with as much as possible and eventually, they will drown!
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