Stricter controls over the movements of advisers who have breaches against them should be introduced, according to the head of a life insurer, who also called for restrictions on the issuing of financial services licences to improve the sector.
ClearView, Managing Director, Simon Swanson stated that all financial advisers should be members of a professional association and in the event they were in breach of an association’s code of ethics they should be barred from providing advice as well as being unable to move to another association or licensee.
Swanson made the comments as part of a panel session at the recent Financial Services Council Leaders’ Summit in Melbourne during which he also called for the creation of a professional body that represented licensees and enforced their compliance with appropriate regulations.
“At the AFSL level, there should be a professional body that represents the interests of licensees but also ensures they are profitable; comply with ethical standards; effectively audit and monitor their advisers; and continuously support them by providing education and training, and valuable practice management tools,” Swanson said.
“There is effectively nothing stopping a rogue adviser from applying for an AFSL”
At the same time, he rejected the development of “cut price ‘licensees for hire’” and called for the Australian Securities and Investments Commission (ASIC) to make gaining an AFSL more difficult, stating many advisers were using the low barrier to entry to avoid being removed from the industry.
“It is too common in financial services that a poor adviser fails a dealer group audit, fails to clean up their act and ultimately gets kicked out of the group only to pop up at another licensee or gain their own AFSL. There is effectively nothing stopping a rogue adviser from applying for an AFSL,” Swanson said.
“The AFSL application process largely involves filling out a form, choosing responsible managers, agreeing to meet a number of obligations and paying a nominal application fee,” he added.
The comments were made within a wider context of how the financial services sector could assist ASIC in its regulatory duties to create better outcome for the industry and consumers.
Swanson called on the regulator “…to engage with licensees and dealer heads who are at the coalface of advice, not executives and heads of distribution at the institutional level”.
““ASIC faces an uphill battle trying to regulate an industry desperately clinging to the old world…”
He added that financial services needed to become better at self-regulation but this would require moving away from maintaining legacy systems, processes and business models – including vertical integration, shelf space fees and the acquisition of advice businesses as distribution channels – which have created many of the industry’s problems.
“A trademark of every financial services inquiry has been organisations with vested interests lobbying and fighting to maintain the status quo, even though the status quo is the root cause of the industry’s woes,” Swanson said.
“ASIC faces an uphill battle trying to regulate an industry desperately clinging to the old world and only prepared to change when slapped with an enforceable undertaking or legislative reform,” he said.
