ASIC to Target Non-Bank Advisers

ASIC is likely to target smaller financial advice groups and individual advisers now that it had a better understanding of the key areas of concerns in the advice process, a financial services legal firm has claimed.

Managing Director, The Fold, Claire Wivell-Plater

In a blog post, The Fold Legal Managing Director, Claire Wivell Plater said while ASIC’s recent enforcement action has focused on institutionally owned advice networks “…it would be foolhardy to assume that non-bank advice firms are not a focus”.

Wivell Plater said ASIC’s pattern of operation is to investigate potential regulatory issues within larger financial advice providers as misconduct may be more widespread and evidence easier to find, allowing ASIC to gauge the nature and extent of misconduct and where it is likely to take place.

These investigations usually lead to a report and enforcement action against larger advice providers, Wivell Plater said, adding that in following this process ASIC has created a template for investigating smaller advice providers.

“They know what to look for, where to find it, what questions to ask – and they have a standard methodology for doing so,” Wivell Plater said, adding “…if ASIC finds breaches which haven’t been voluntarily reported, enforcement action will follow, as night follows day”.

“…it would be foolhardy to assume that non-bank advice firms are not a focus”

Based on the regulator’s Corporate Plan (see: ASIC Outlines Ongoing Focus on Life Insurance) and enforcement outcomes from the second half of 2017, Wivell Plater said non-bank planners and life insurance advisers should expect ASIC to start examining life insurance churning, the use of super funds to pay life insurance premiums and charging of fees for no advice.

Wivell Plater said ASIC had become ‘highly adept’ at detecting bad practices around life insurance as it now received regular reports on high lapse rates from insurers.

At the same time she claimed ASIC was looking at 150,000 more refunds related to fees for no advice, beyond the 27,000 customers of major banks who had already received refunds, which meant the problem was not confined to institutionally aligned advice.

“This means that selling grandfathered investment trail commission books must be a thing of the past – even if the government doesn’t legislate to end grandfathering,” she said.

Additional issues that are also likely to be examined according to Wivell Plater include failing to consider whether a clients’ existing products will meet their objectives before recommending replacement, the use of inhouse products that generate extra revenue with a client benefit, the inclusion of services that don’t add value and inappropriately recommending SMSFs.

  • Alleycat

    Some of M/s Wivell- Plater’s comments may be true but it’s a shame that out of sheer ignorance that she should make sweeping statements that are far from the truth.
    First off, many long standing clients where trail brokerage is paid are not ignored by advisers, in fact they are serviced and treated like they were when they first became clients.
    For her to say that they are not,…. and trail brokerage should be eliminated would suggest that like lawyers, ….advisers should charge exorbitant hourly review fees, inflate the billable hours, instead of perhaps receiving say a small percentage for managing funds under management.
    For her to say that attaching life insurance into super is a bad thing, then perhaps she should consider that sometimes clients can’t afford to pay the real cost of life insurance out of their disposable dollars and perhaps having life cover inside super either via employer contributions or personally where the cost is significantly lower with a tax deduction is their best option.
    Sounds like this lady should get all her facts right before making these kind of statements.

    • on the inside


      “First off, many long standing clients where trail brokerage is paid are not ignored by advisers, in fact they are serviced and treated like they were when they first became clients.”

      You can’t seriously be suggesting this is the average (let alone predominant) experience for client trail books?? If you are, you need to get out more, perhaps go and have lunch one day with a few product managers, shoot the breeze on what they see across their products, thousands of advisers and 10’s of thousands of client accounts, rather than drawing inferences from your experience alone, you will be unpleasantly surprised.

  • Phil

    The big banks came to town in the late 90s to early 00s creating their vertically integrated monoliths as they acquired various life office businesses. They pillaged and stripped the industry of all its integrity. Upon being found out and having to be held to account – they started to exit the insurance industry selling off the likes of MLC, OnePath and CommInsure. From whence in history does this sound very familiar – Nero fiddled whilst Rome burned? And yes, the big banks can basically write it all off and spend a small fortune to advertise and rebuild their credibility. But yes, the small end of town will be the biggest losers. Hung, drawn and quartered mainly by association, not by fault or guilt.

  • Ken

    Enthusiasm must be running amock in the legal circles with all this possible class action and even individuals taking action about the unfair and one sided approach being orcastrsted by the mindless politicians and government employees who have no idea of the real world
    It’s scare mongering at its best and it’s the old story never let the truth get in the way of a good story
    I dream ( and that’s the operative word) that someone will come to power look down on this compare the truth verses fiction and say enough is enough what do you think you are doing?
    But no ! to many self interest groups here only when they take that last step will they realise what they have done it’s a big drop and a long way down with little chance of surviving