The Financial Services and Credit Panel has required a financial adviser to receive specified supervision in relation to three SoAs.
The FSCP’s Outcomes Register says that in relation to the first SoA, the adviser contravened two sections of the Corporations Act “…by recommending that the client make a voluntary contribution to their superannuation fund to obtain a personal tax deduction when the superannuation fund did not allow voluntary contributions.”
Insurance Recommendations
In relation to the second SOA for a married couple nearing retirement, the FSCP says the adviser contravened in relation to their insurance recommendations “…by failing to consider the insurance options available in one of the client’s superannuation funds, and by failing to address the conflict between their retirement goals and their financial protection goals.”
…[They] also underestimated the costs of the insurance in the SoA’s retirement projections by $74,479 for one client…
It says the adviser “…also underestimated the costs of the insurance in the SoA’s retirement projections by $74,479 for one client and $14,566 for the other client.
“The relevant provider further contravened s961J because in spite of the advice not being in the clients’ best interests or appropriate, the insurance recommendation earned an upfront commission of $20,000, and an ongoing commission of $6,700.”
The panel says that in relation to the third SoA for a married couple with a very low combined income and superannuation balance “…the relevant provider contravened s961B(1) in relation to their superannuation and insurance recommendations by failing to ascertain the details of one of the client’s superannuation funds, and by failing to consider the insurance options in both of their existing superannuation funds.”
…failed to refer to the 50% to 75% loading that would apply to the insurance recommendations for one of the clients in the SoA…
It says the adviser also “…failed to refer to the 50% to 75% loading that would apply to the insurance recommendations for one of the clients in the SoA, and failed to address the effect this would have on their superannuation balance.”
The Sitting Panel found that as a result of the above contraventions, the adviser failed to comply with s921E(3) of the Corporations Act 2001 “…by failing to comply with the FASEA Code of Ethics, notably Standard 2 and the Value of Diligence.”
Its written direction requires the adviser to receive specified supervision so that they “…engage an independent compliance professional, at the relevant provider’s own cost, to pre-vet the next 10 SoAs containing insurance advice and the next 10 SoAs that contain superannuation advice that the relevant provider intends to present to a retail client (noting a piece of advice may include both insurance and superannuation recommendations).”
The relevant provider is then required to provide the independent compliance professional’s findings to ASIC.
(The FSCP is a pool of industry participants, appointed by the responsible Minister, that ASIC draws upon when forming individual sitting panels. It operates separately from, but alongside, ASIC’s existing administrative decision-making processes.)
