ASIC says $30 million paid to customers misled by wrong advice in its review of financial institutions

Nearly $30 million was paid to 1,347 customers who suffered losses after they were misled by financial advisers, while the securities watchdog banned 26 advisers for misconduct as of December 2016. 

These are the findings from a review by the Australian Securities and Investment Commission of how Australia's largest financial advice firms have dealt with past poor advice and non­-compliant advisers, including how these firms have dealt with affected customers. 

The review, which forms part of ASIC’s broader Wealth Management Project, was focussed on the conduct of the financial advice arms of AMP, ANZ, CBA, NAB and Westpac.

ASIC deputy chairman Peter Kell said the report, “sets out the significant work that has been done by the major financial advice institutions to implement large­-scale review and remediation programs to identify and remediate customers impacted by poor advice given in the past”. 

The review looked at: 

• how the firms identified and dealt with non­compliant conduct by their advisers between 1 January 2009 and 30 June 2015
• the development and implementation by the firms of large­-scale review and remediation frameworks to remediate customers impacted by non­compliant advice, and 
• the processes used to monitor and supervise the firms' advisers, focussing on background and reference ­checking, the adviser audit process and use of data analytics. 

ASIC Report 515 Financial advice: Review of how large institutions oversee their advisers (REP 515) covers the key findings of this review.

He said that while financial advice institutions had done much to improve their practices and compliance, more work was needed to re­build consumer trust in the financial advice industry.

ASIC has identified a number of areas of concern where further improvements need to be made, including: 

• failure to notify ASIC about serious non­compliance 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, and
• inadequate audit processes to assess whether the advice complied with the 'best interest' duty and other obligations. 

“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,” Kell said. 

“Strengthening breach reporting requirements will be an important issue in the current review of ASIC's enforcement powers announced by Government in October 2016,” he said. 

The Australian Bankers' Association's recently announced a Reference Checking and Information Sharing Protocol, that takes a more rigorous approach to checking and provision of adviser references. Financial institutions regularly use data analytics now to detect irregularities early and take action.