ASIC: how are large advisory firms dealing with poor advisers?

ASIC has released its findings into how Australian financial advice firms are dealing with the bad behaviour and poor performance of advisers and their questionable advice. 

The review of large advisory firms is part of ASIC's Wealth Management Project which has narrowed its gaze upon the financial advisory businesses of AMP, ANZ, CBA, NAB and Westpac after serious concerns were raised regarding adviser misconduct. Lifting standards has been the project's key objective. 

What is the review for?
The review is examining how advice companies are first identifying, then dealing with, noncompliant advisers between January 2009 and the end of June 2015. The review is also designed to develop and implement a large-scale review and remediation framework so customers affected by poor advice can be compensated. This review process will also monitor and supervise advisers, with a greater focus on background and reference checks. 

The main report, Financial advice: Review of how large institutions oversee their advisers, looks at the key findings of the review and provides an update on what ASIC is doing. So far, ASIC has banned 26 advisers who were identified in this review, with their serious compliance issues, and has ongoing investigations into many more. 

So far, $30 million has been paid to over 1,300 customers who suffered losses or detriment as a result of a bad adviser and their erroneous advice during the review period. This amount is in addition to the compensation paid by institutions as part of the fee-for-service compensation payments of a previous review. 

Areas of concern - improvements still to be made:

  • The reporting of breaches - failures are still common
  • Delays between institutions finding out about breaches or misconduct and the reporting to ASIC
  • Inadequate background and reference-checking processes
  • Inadequate audit processes to assess advice and its compliance with 'best interest' duties and other obligations

REP 515 Financial advice: Review of how large institutions oversee their advisers and checklists