Court hits IOOF unit RI Advice with $6m fine for defective financial advice

IOOF-owned wealth management unit RI Advice has been hit with a $6m fine by the Federal Court for giving defective financial advice

IOOF chief executive Renato Mota. IOOF’s subsidiary RI Advice has been ordered to pay a $6m fine. Picture: Stuart McEvoy

RI Advice, the wealth manager formerly owned by ANZ, has been ordered to pay a $6m fine – in addition to the $6.5m it has agreed to pay in remediation – after a court found it failed to ensure its representative put clients’ interest above his own.

Federal Court judge Mark Moshinsky found RI Advice – now owned by IOOF – did not properly verify when advisers were avoiding advice quality checks or were recommending non-approved products.

Justice Moshinsky also handed out an $800,000 fine to a former financial adviser at the IOOF unit, John Doyle, finding he gave “cookie cutter” advice to retail clients to invest in complex financial products for which he received upfront and ongoing commissions.

While he found RI Advice did not deliberately hand out the allegedly defective advice and had paid back affected clients $6.5m in remediation, Justice Moshinsky said the failures of the business concerning Mr Doyle, who was an authorised representative of the IOOF unit through his Melbourne business Carrington Financial, were serious.

The penalty decision comes after Justice Moshinsky found in August that RI Advice was liable for Mr Doyle’s alleged misconduct because it failed to ensure he provided appropriate advice, acted in clients’ best interests and put their interests above his own. RI Advice could not identify where advisers were avoiding advice quality checks or recommending non-approved financial products, he said.

Australian Securities and Investments Commission deputy chairwoman Sarah Court, said on Thursday that the complex products Mr Doyle recommended were “not suitable” for his clients, many of whom were of retirement age. Mr Doyle had admitted to all allegations made against him by ASIC.

“RI Advice should have been properly monitoring Mr Doyle’s advice to ensure he was complying with the law,” said Ms Court.

“The $6m penalty handed down by the court against RI Advice sends a strong message to financial services licensees to properly monitor the advice given by their advisers to make sure consumers are protected.”

ASIC launched its case against RI Advice and Mr Doyle in October 2019, claiming the business knew, or should have known, that there was substantial risk of Mr Doyle not complying with his obligations under the law and that he was repeatedly recommending structured products to his clients, bypassing compliance processes

The case first came to light during the financial services royal commission, which had investigated Mr Doyle’s alleged wrongdoing as a case study on “bad advice”. Mr Doyle worked as a financial adviser at RI Advice from May 2013 to June 2016.

SIC commenced a further investigation of Mr Doyle after the royal commission heard evidence which exposed how ANZ offered large cash incentives to recruit financial planners, including Mr Doyle, before new legislation came into effect in 2013 that would have stopped the bank receiving lucrative ongoing commissions.

RI Advice did not respond to a request for comment.