The Australian Securities and Investments Commission (ASIC) has begun court proceedings against a Melbourne based licensee and its authorised representatives for alleged breaches of best interest obligations, misleading and deceptive conduct and failing to have hold a financial services licence.
ASIC will head to the Federal Court on 31 March seeking injunctive relief, declarations of contraventions and financial penalties against Wealth and Risk Management Pty Ltd (WRM), and related companies Yes FP Pty Ltd and Jeca Pty Ltd, trading as Yes FS.
According to ASIC, WRM is licensed to advise retail clients about life risk insurance and superannuation products, and authorises advisers employed by its corporate authorised representative Yes FP to provide personal financial advice to retail clients referred to them by Yes FS.
In a statement tendered to the Court, ASIC claimed that via a complex referral arrangement between WRM and Yes FS, consumers approaching the latter for a cash loan had to agree to receive financial advice from WRM and replace their existing superannuation fund with one recommended by WRM.
Applicants for the loan also had to purchase Life, TPD and/or Income Protection insurance policies and agree to a fee for advice, and the insurance premiums, being charged to the superannuation fund.
ASIC alleged that on numerous occasions since December 2015, WRM Advisers provided advice that was conflicted and in breach of the best interest obligations contained in the Corporations Act.
The regulator also alleged WRM breached the Act further by failing to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly and had not taken reasonable steps to ensure that its representatives complied with financial services laws.
ASIC also claimed that Yes FS contravened the Corporations Act by carrying on a financial services business without holding an AFSL and by engaging in misleading and deceptive conduct.
Third line forcing around the approval of the loan facilities has been going on for years.
Many years ago I confronted a then a deputy chairman of ACCC demanding to know why the ACCC didn’t seem to be interested in challenging the banks who were and are the principal third line forcers, particularly when an applicant was seeking a new loan facility. Numerous clients of mine, when challenged why they had lapsed the cover they held through me, said that it had been inferred to them that their loan application would gain considerable strength if they allowed one of the bank financial advisers to “review” their existing life risk portfolio.
His answer was the ACCC needed a complaint from the client, not the adviser. To which I added that no client I knew would be prepared to sign a letter complaining to the ACCC about bank activities after his loan was approved – he wanted to get on with life.
So if ASIC is interested in cases of “third line forcing” perhaps it should go back to the banks and asked to see files were insurance was moved to the bank owned insurer AFTER the loan was approved.
Here is your golden opportunity ASIC to restore some of your lost prestige in the life risk advisor industry where you are seen to be soft on the banks.
Ask life risk advisers to submit incidences where client insurance was twisted to a bank owned insurer immediately after a new loan facility was approved.
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