Commonwealth Financial Planning (CFPL) and Financial Wisdom Limited (FWL) will be required to examine the advice of a further 17 advisers after an independent report found clients of the advisers should have been included in compensation schemes conducted by the two groups.
The two licensees are already examining client files of 15 former advisers with independent expert, Korda Mentha, stating in its report that it found 51 ‘high risk advisers’ of which 17 should have client and advice files examined under compensation schemes currently underway with the Commonwealth Bank owned licensees.
The report examined whether the licensees had a reasonable basis for the steps and processes used in 2012 to identify which clients of the 15 former advisers would be assessed in a compensation program.
The report also examined if there were other advisers who may have provided inappropriate advice and whether should have been assessed in the compensation program as well.
In the report Korda Mentha stated there was a reasonable basis for the first two actions but there was no reasonable basis for the third recommending the additional advisers be added to the compensation process.
“…the Licensees need to implement additional processes to undertake further reviews of the advice provided by 17 potentially at risk representatives.”
The report stated CFPL and FWL had a reasonable basis for determining which clients of the 15 previously identified former representatives would fall under the compensation program.
It also stated the two groups had a reasonable basis for the process used in mid-2012 to identify authorised representatives who had shown “attributes or behaviours which indicated the relevant representatives may have provided inappropriate advice”.
“The Licensees did not have a reasonable basis for the ‘additional processes that each Licensee undertook to determine whether any of those [51] Potential At Risk Representatives ought to have been assessed as part of the Compensation Program’.”
“As a result of the above findings, in our opinion the Licensees need to implement additional processes to undertake further reviews of the advice provided by 17 potentially at risk representatives.”
The report, released by Korda Mentha in the lead-up to Christmas, was the second in a series of three reports, with the first – highlighting the inconsistency and deficiencies of an original $52 million compensation scheme – released in April 2015. A preliminary report, detailing changed licence and compliance conditions, was released in August 2014.
A third report will be released during 2016 examining whether CFPL and FWL have complied with additional AFS licence conditions, including the implementation of advice review and client compensation activities arising from the first two reports.
