Having undertaken surveillance of AAA since June 2010, ASIC determined the financial planning business was in breach of the Corporations Act 2001 and conditions of its AFS licence, subsequently terminating the licence.
In the updated guidance issued on Wednesday 6 February, ASIC explains the 186 authorised representative-strong planning network had implemented a business model in which cash flow was correlated with the number of advisers admitted to the network.
“The fee charged did not maintain sufficient financial resources to comply with its general obligations,” the guidance document explains, adding that the company failed to maintain adequate human and technological resources and records of staffing, employment and client base.
The watchdog also found AAA had failed to ensure its authorised representatives were sufficiently trained and compliant with the relevant laws and regulations.
It found there had been inadequate advice auditing procedures in place, breaching the group’s own audit policy.
“Licensees have a general obligation to do all things necessary to ensure they provide financial services efficiently, honestly and fairly,” ASIC commissioner Peter Kell reiterated in a statement accompanying the released information.
“AAA Financial Intelligence was found to have an appalling record that put at risk the quality of advice it provided to retail clients,” he added.
ASIC has instructed AAA representatives to communicate the consequences of the licence cancellation to clients.
AAAFI business was all about having more and more advisers and not the quality of advice. Compliance was a major issue as Ken Whybrow stated in his article in Investor Daily. Whilst only about 35 advisers failed their compliance audits, sadly many others did a good job however they will be branded with the same way despite not deserving that tag.
Dealers groups must get their compliance in order and ensure their advisers are compliant. This gives everyone a clear warning that compliance is not optional.
ASICs efforts to “weed out” the bad guys are really fruitless because these shonky operators will just move into a more profitable, less compliant and totally unregulated area and continue selling products that don’t work to consumers, and ASIC can’t do anything about that!
A leopard never changes its spots, and shonky operators will always find another way to rip-off vulnerable consumers!
In summary, ASIC will only win the battle but always lose the war!
ASIC are slowly weeding out the bad guys. It’s a pity there still many out there. The unprofessional planners are those holding back the industry which wants to call itself a profession.