The need for an industry standard approach to breach reporting and greater transparency of the employment history of advisers were among the key issues discussed at a Senate Committee hearing featuring senior executives from a number of Australia’s largest financial institutions.
Executives from CBA, NAB, ANZ and Macquarie appeared before the Senate Economics References Committee in Canberra this week, as part of the Scrutiny of Financial Advice inquiry. The focus of the inquiry is the implications of the Future of Financial Advice (FoFA) reforms, and how financial services providers and companies have responded to misconduct in the industry.
Each of the institutions presenting before the Committee provided a short statement before taking questions, and in all cases the institutions outlined the steps they had taken to improve financial advice, such as training and education standards, breach reporting and systems and procedures.
Among the other issues raised by the Senators were:
- What action the institutions took when an adviser acted fraudulently or breached their compliance obligations
- What needs to be done to improve transparency within the industry when an adviser who has been fired for poor conduct/advice goes to another licensee, with a particular focus on the role of ASIC’s Financial Adviser Register
- Whether there should be a public compensation fund to support victims of advice failures
- What constitutes a ‘significant breach’ and triggers a report to ASIC, with the Committee noting that there appears to be no standard definition and that each institution has their own approach
There was a general consensus among participants that the standards of breach reporting and the internal investigation of advice complaints had improved in recent months. However, most agreed that there needed to be an industry standard definition for what constitutes a ‘significant breach’ and that the ASIC Financial Adviser Register could play an important role in helping to track ‘bad apples’, including advisers who chose to leave their licensee during an investigation into their conduct.
Coinciding with the hearing, Assistant Treasurer, Josh Frydenberg, issued a statement highlighting the steps the Government and ASIC has undertaken to raise the standards of financial advice. He confirmed the Government would be consulting with industry and consumer representatives in late April on the recommendations made by the Parliamentary Joint Committee on proposals to lift the professional, ethical and education standards in the financial services industry.
“We need to make sure that consumers receive high quality outcomes. And we need to maintain public confidence in the financial services industry. It’s time to put in place an enduring framework that raises the professional, ethical and educational standards of advisers,” Mr Frydenberg said.
For my sins, and in a spirit of self-flagellation, I watched all 5 hours of this
All banks were questioned on their interpretation of the use of the word “significant “in terms of notifying breaches to ASIC. All said they had no idea but would ask ASIC. That’s interesting because the Corporations Act leaves the decision to the Licencee
ASIC is fond of other terms which are always subject to interpretation, in their minds, or in court
The other classic is “appropriate “. While these terms remain undefined ( if you saw it in an insurance definition you would run a mile ) ASIC have additional powers which were not intended
Its a deliberate lawyers picnic.
Remember, ASICs report on life insurance focused in part on advisers recommending “significant ” percentages of the clients SGC contribution to cover the cost of insurance placed in super.
Nowhere in the ASIC report was there a definition of what was significant -30%, 40%, %60% – who knows?
Advisers are none the wiser as to where significant commences. Boundaries need to be set, or ASIC has all the power, AND they are not sitting in front of the client
From a consumer viewpoint, Nic Xenophon had a big victory in buffaloing the NAB to withdraw all GAG orders attached to settlements
What is so SIGNIFCANT ABOUT premiums being used for life cover in superanuation. All the employer has to do is pay the 9% (now 9.25).All the employee has do to is have a suitable superfund to receive the payment.
What if he is a middle aged man with a second marriage to a younger woman and has two kids under five years and has a $400000.00 MORTGAGE AND GETS LOADED that will use up the nine %.
OH I FORGOT….. We are supposed to use these wiz bang group life arrangments that mostly go out of force with in 4 weeks of leaving the employer fund. What happens when he overlooks that and then dies?
Any one can see there has been two many cooks in our kitchen this last few years!
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