In a statement today, ASIC announced the enforceable undertaking of Financial Index Australia Pty Ltd (FIA), part of Findex Group Limited.
The EU comes after ASIC found FIA had moved clients from their existing product into a more expensive FIA branded product, without sufficient explanation or justification.
The EU was offered following surveillance by ASIC, which looked at a number of FIA’s policies, procedures and client advice files.
Through its surveillance, ASIC identified a number of concerns in relation to FIA’s financial advice business, including out-of-date policies and procedures, deficiencies in the file audit process, and insufficient information being provided to clients who were being moved into new products.
The surveillance conducted by ASIC found that a number of FIA’s policies and procedures were deficient and referred to old sections of the Corporations Act 2001.
Further, FIA’s Adviser Incentive Scheme was likely to encourage representatives to switch clients from existing third party products to FIA’s own branded product.
Meanwhile, the majority of clients whose files were reviewed by ASIC were moved from their existing third party product to a more expensive FIA branded product without adequate justification or explanation as to why the move was likely to leave the client in a better position.
ASIC said that in the majority of cases where clients were recommended to switch from their existing third party product to a FIA branded product, the SOAs provided to clients did not include the additional information required when an adviser recommends replacing one product with another.
For those clients who were recommended to switch, there was a lack of detailed inquiries into the client’s personal circumstances, financial needs and objectives, ASIC said.
Last year, Findex and FIA were penalised for using the terms ‘‘independent’ and ‘non-aligned’ on websites. Findex responded to the penalty claiming it was not the group’s intention to mislead clients.
Great work by ASIC. It’s a shame they couldn’t impose the EU earlier as those behaviors and poor advice standards tarnish the industry and bring down all the “good and non-aligned” advisers who work under there own AFSL’s.
Possible that Findex advisers are only “employees” and not Authorised Reps. Most of them have their own “best interests ” in mind if they are promised bonuses to churn.
One wonders whether the term “not vertically integrated” would be acceptable in the ASIC lexicon. IFAs could use this to differentiate themselves from those advisers working under an AFSL belonging to the Big 5 and the Union Super Funds, where any investment or insurance is likely to be skewed towards the ‘house’ product owned by the group at the top of the vertically integrated totem pole.
They’re processes are system driven. The same policies and processes flagged by ASIC in the EU exist across all subsidiaries – Centric Wealth, CIVIC FP, Crowe Horwath and Prescott Securities. I hope ASIC look under the hood on all these businesses. They may find a culture of systemic breaches….
+1 to that comment. Where there is smoke.
sorry thought only insto or the vertically integrated (the great unwashed) only had the product bias, when we learn, what will it take for ‘us’ to make the structural changes needed in our industry !!
Small AFSL’s are ripe for the picking by ASIC, They don’t have the resources to manage effectively an ASFL in this environment.
If they’re vertically integrated as Findex are, I can’t agree. They should have the resources to manage an AFSL and should be deploying them appropriately. This doesn’t read that way.
We saw a family member of ASIC’s chairman get a small $21k fine for ripping people off. Now a Findex subsidiary gets caught out ripping people off and gets an EU; albeit, a different type of con. No wonder consumers and good financial advisers have little confidence in our financial system.
[i]”the SOAs provided to clients did not include the additional information required when an adviser recommends replacing one product with another.”[/i]
I don’t for a second believe that additional disclosure in an SoA would prevent this kind of behaviour, but why does ASIC not outline what was missing?
While other issues at play here, seems people often forget lowest price does not = satisfying BID. If it were the case, you’d all be driving the cheapest car you could buy.
Agree Jimmy. For example, we could all recommend unitised group insurance cover from one of the Union Super Funds. At the default level it’s cheap enough, unfortunately you wouldn’t want to be relying on it too heavily come claim time, especially for TPD. Although i’m sure that ASIC think all Union Super insurance cover is fine when recommended by a vertically aligned adviser from Union Super Funds, not sure it would be the same if I recommended it…. …although I’d like to think that I’d self-report myself if I ever thought about doing so…
I was thinking the same thing, normally this type of activity is followed by a mass adviser banning and a publicly naming & shaming campaign and the ruination of the advisers businesess!?! Have the Liberals taken over ASIC or something to that extent?
I think that the next big dirty word to emerge in the industry after the word “churn”, is the word “Transitions”. .
Why aren’t these advisers being banned then for failing the best interest duty? This guy was https://www.ifa.com.au/news/18131-former-bt-amp-adviser-banned
because they werent related to the chariman at ASIC?
So for blatantly ripping off clients without a reason they get a EU? Where is the consistency?