ASIC vows to target financial planners after scandals

THE Australian Securities and Investments Commission says it will keep a close eye on the six largest financial advisers.

THE corporate watchdog is targetting the financial advice industry in the year ahead.

The Australian Securities and Investments Commission says it will keep a close eye on the six largest financial advisers, as well as operators of managed investment schemes, for signs of illegal and risky behaviour.

“We remain concerned about the culture of financial services businesses, and the incentive structures they use,” ASIC said in an outline of its strategy for the current financial year.

“The welfare of their customers should be at the heart of their business.” The unveiling of fraud and misconduct by planners at Commonwealth Bank between 2006 and 2010 has sparked concerns about the practices of financial advisers, and their level of education.

The ­Financial Services Council, the umbrella body for retail super­annuation, recently said a ­financial advice competency standards board was necessary because of the “hellish’’ 12 months the industry has been through in reputational terms with the Commonwealth Bank and Macquarie planning scandals.

The FSC’s call trumps a succession of calls from different players in the industry to lift educational and professional standards, given that financial planners merely have to pass the notoriously easy RG146 exam to be accredited.

CBA is now reviewing a decade of activities from 2003, while Macquarie Group has also been ordered by ASIC to review whether its past clients have lost funds due to misconduct.

Figures released last week show more than 4000 customers of CBA’s financial planning arms have registered for their advice to be reviewed, suggesting its remediation program may take in around 5 per cent of ­clients.

Three months after apologising for the saga and announcing the “open advice review” program, CBA revealed 4200 customers had registered to have their cases reviewed.

While the bank has about 400,000 planning customers, it cannot predict the number of clients that may come forward due to shoddy record keeping.

Eleswhere, AMP has moved to increase its education standards for financial planners.

Following the collapse of Storm and the subsequent Ripoll inquiry into financial services, a government expert advisory panel was created to review standards in the financial advice industry.

Even so, ASIC has been criticised for failing to properly deal with misconduct in the industry, specifically its slow response to whistleblowers.

The watchdog’s strategy outline says it plans to carry out “pro-active risk based” surveillance of financial advisers in the coming months, concentrating on their compliance with rules and regulations.

“We will also continue to undertake reactive surveillance to detect possible wrongdoing,” it said.

“Where there are issues, we will take timely and appropriate action without fear or favour.”

Other key areas of focus for ASIC include overseeing the rise of digital disruption in financial services and markets and montioring financial innovation-driven complexity in products, markets and technology.

Meanwhile, the regulator said a “deregulatory focus” means it will continue to reduce red tape by removing processes that provide little regulatory benefit.

-with AAP