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ASIC tells banks “there is further work to be done”


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Australia’s biggest banks are still not doing enough to report non-compliant financial advisers, ASIC said in its review of the industry.

The Australian Securities and Investments Commission (ASIC) has today released the findings of its review into how Australia’s largest banks are dealing with rogue financial advisers, saying there is still "further work to be done".

The review centred on the financial advice arms of ANZ, AMP, CBA, NAB and Westpac, and arose out of serious concerns about the misconduct of past financial advisers which had caused customers great financial loss.

The review looked at how the organisations dealt with non-compliant conduct by their financial advisers, re-mediated and compensated customers negatively impacted by bad advice and monitored and supervised advisers.

As of 31 December 2016, ASIC had banned 26 non-compliant financial advisers across the five organisations and continues to investigate many others.

Throughout the period of the review, a total of $30 million has been paid to 1,347 customers who suffered loss due to poor financial advice.

ASIC deputy chairman Peter Kell said that while these financial organisations had implemented measures to rectify these issues, there was still a lot to be done.

“ASIC acknowledges the work undertaken by the financial advice institutions to improve their practices, and broader compliance approach, since the period of conduct under review, supported by recent legislative and regulatory reforms,” said Kell.

“However, there is further work to be done to assist in rebuilding consumer trust and confidence in the financial advice industry,” he said.

The key areas of concern identified in ASIC’s review include:

  • Failure to notify ASIC about serious non-compliance concerns regarding adviser conduct
  • Significant delays between the institution first becoming aware of the misconduct and reporting it to ASIC
  • Inadequate background and reference-checking processes
  • Inadequate audit processes to assess whether the advice complied with the "best interest" duty and other obligations.

“Failure or delay in notifying ASIC of suspected serious non-compliant conduct significantly affects our ability to take appropriate enforcement or other regulatory action,” said Kell.

“More importantly, it may also result in an increased risk of customer detriment as so-called "bad apple" advisers continue to work in the industry.”

ASIC acknowledged the Australian Bankers’ Association’s new reference Checking and Information Sharing Protocol and said it would be keeping a close eye on this to ensure it is effective.

“It is critical that customers are able to get financial advice they can trust. ASIC expects internal processes to support core values of putting the customer first and where there are failings, for advice firms to act quickly to provide a response in the interests of their customers. This is a message for both large and small advice firms,” Mr Kell said.

ANZ has today commented on the release of ASIC's review, with group executive wealth Australia Alexis George saying, “We know we need to work harder to maintain the trust of our customers and we will continue to take a hard-line approach with the minority of advisers who do the wrong thing."

“This is why we engaged independent external experts to both test and endorse our advice compliance systems and also why our existing audit checklist addresses each element of the best interest duty."

“While we were surprised by the findings within the review relating to internal audits across the industry, we will work closely with ASIC to better understand and address any concerns specific to ANZ,” Ms George said.

If you’re considering a financial adviser, check out our guide to understand what a financial adviser does, what qualifications they should have and how they could help you.

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