ASIC has banned Queensland-based financial adviser Timothy Shapter from providing financial services for a period of seven years, and cancelled the Australian financial services licence of Smart Solutions Group (Aust) Pty Ltd.
A statement from ASIC says Shapter was a director and an authorised representative of Smart Solutions.
The commission says its review of a sample of Shapter’s advice files found that “…he provided advice that was not in his clients’ best interests, was not appropriate to his clients, and that gave priority to generating fees for himself over the financial interests of his clients”.
“The review found that Mr Shapter provided inappropriate switching advice by recommending that clients switch out of their existing superannuation and insurance products, and into higher fee paying products,” ASIC states.
The regulator noted Shapter also used a ‘layered advice’ strategy, whereby he provided his clients with a superannuation statement of advice first, followed by an insurance statement of advice a few weeks later. It stated this process was found to be confusing for clients and, in some cases, resulted in lost insurance or policy exclusions.
The review also found Shapter issued multiple Statements of Advice and provided inappropriate switching advice to generate fees for himself, the regulatory body says.
ASIC states that Shapter obtained most of his clients under a referral arrangement with a third party engaged by Smart Solutions. “The third party cold called potential clients and obtained limited details about their financial circumstances and their risk profiles. Mr Shapter then used this limited information to prepare his advice documents. He usually issued his superannuation statements of advice on the same day that the initial client enquiries were made by the third party. ASIC found that Mr Shapter could not have properly enquired about, or considered, his clients’ needs and circumstances, their reasons for wanting advice, or the most suitable options for their circumstances within such a short timeframe.”
…financial advisers have a legal obligation to act in the best interests of their clients when providing personal advice…
ASIC says that financial advisers have a legal obligation to act in the best interests of their clients when providing personal advice.
“This includes taking reasonable steps to understand their clients’ personal circumstances and exploring existing financial products to ensure they are providing appropriate advice that meets their clients’ objectives.”
ASIC states it has also cancelled the AFS licence of Smart Solutions “because the licensee failed to ensure that financial services were provided efficiently, honestly and fairly. Smart Solutions also failed to adequately monitor and supervise its authorised representatives, and maintain competence to provide the financial services covered by its licence”.
“For example, Smart Solutions permitted some of its authorised representatives to audit their own advice files. It also provided false information in connection with the anti-money laundering customer verification requirements because it allowed its authorised representatives to falsely declare that they had sighted official identity documents,” ASIC states.
The regulator says AFS licensees must ensure that they have adequate resources and arrangements for monitoring and supervising their representatives. “Individual advisers cannot audit their own advice.
“Licensees who allow advisers to obtain their clients under a referral arrangement should ensure that advice provided by those advisers is based on the client’s circumstances and supported by adequate enquiries made by the adviser.”
ASIC says the banning of Shapter and the cancellation of Smart Solutions’ AFS licence are part of its ongoing efforts to improve standards across the financial services industry.