Yesterday ASIC issued a statement revealing the actions taken by 10 licensees in response to concerns raised about retail structured product advice in 2013, including a range of bank-aligned and independently-owned groups.
Among them was NAB’s Meritum licensee, which was home to a number of advisers sacked by the bank over the past five years, according to reports in the Fairfax press and subsequent confirmations from NAB.
The ASIC document reveals that at least three of the Meritum advisers whose authorisation was removed were involved in “systemic breaches”.
“ASIC’s review [of Meritum] indicated potential breaches of the requirement to make enquiries of clients’ relevant personal circumstances and to provide a statement of advice in the required time frame, as well as other disclosure concerns including potential misrepresentation of product features,” the report stated.
In addition to de-authorising the individuals, Meritum wrote to affected clients notifying them of the terminations and explaining that it will “assess whether client compensation is required”.
Meritum also lodged a “significant breach notification” to ASIC in relation to its failure to detect the misconduct.
“ASIC is assessing the information obtained from the licensee to determine whether further regulatory actions are required,” the statement concludes.
The statement follows NAB CEO Andrew Thorburn’s announcement of changes to the bank’s process for financial adviser misconduct.
Other licensees listed by ASIC included AMP’s Genesys Wealth Advisers, CBA-aligned Count Financial and the entire Westpac Banking Corporation, as well as non-aligned dealers Sentry, Madison Financial Group and FSS Advisory.
MLCs dealer groups are still offering to cover “expenses ” of a switch of AFSL. Its a “grant ” – not a loan. In my case, there was a clear inducement to move business and an expectation that a large proportion of my new business to go to MLC. Takeover terms would be on offer.
This sort of recruitment is de rigour in the commercial world.
But advisers have a regulator who hates systemic replacement of risk business.
Yet not once does ASIC publicly go after the insurers/dealers when such offers are made, and mass policy replacement occurs. There is little vetting about the quality of the adviser and the advice – BUSINESS VOLUME IS KING
Take-over terms is done with the approval of Re-insurers
To me, ASIC either accept the reality re inducements, and the policy replacement flow-on, as commercial reality OR they prosecute the insurers and AFSLs who provide the inducements
Steve is right. Ask some of the advisers being courted during the AMP, AXA, NAB discussions. I saw some of the figures being offered advisers to switch alliances and it was staggering (7 figures). And it wasn’t based on compliance adherence! It was based on how much business they could funnel into the parent companies pockets.
You make a fair case Steve and I don’t disagree on the number chasing. Meritum was a different case, as NAB picked them up when they purchased Aviva’s Australian assets (Aviva had a large piece of Meritum at the time). I doubt Meritum could raise the money to buy the bank out and we know banks like to own 100% when it comes to dealer groups. They would have had to take Meritum almost by default. The other issue is a few of the advisers in strife were added after the takeover by NAB (yes that raises questions I agree). Meritum actually had a flawless record before NAB got involved. Don’t recall hearing their name attached to any scandals (e.g. agri, structured products, double gearing). There are other dealer groups in much worse shape and they won’t want to be casting the first stone. Meritum has 6 planner out of 140 being looked at. Hardly what you’d call a shambles.
I understand that lax paperwork isn’t necessarily a hanging offence, however over my 30 years in the industry I have seen countless examples where poor remediation by the licensee allows these problems to fester; that is not an assumption- it is a fact. My point though was all about licensees pursuing numbers above all else. I had a stint in licensee land about 10 years ago and I had a distinct target for net adviser numbers (with a bonus structure not linked to any other performance measure). I know this model, whilst hopefully now dead, had survived up until very recently. In one of the cases I mentioned in the original post a significant industry compliance consultant actually warned the acquiring organisation that there was a significant risk in doing an “all in” recruitment of a dealer group. When you get a warning like that its pretty silly to ignore it !
So what Due Diligence did MLC/NAB do at time of buying Meritum? Instead of a Royal commission how about throwing the money at ASIC to employ people to police the laws we already have? My view is taht in many dealer groups supervision and monitoring of their authorised represenattives is very light touch.
Don’t jump to conclusions Steve. A compliance breach doesn’t automatically mean dishonesty and crooked behaviour. They are different things entirely. Many of the cases involve lax paperwork and shoddy processes, but most don’t involve dishonesty or loss to clients. Be careful when throwing stones, as ASIC are not just after the crooks anymore. I would guess that there are a lot of licensees whose compliance is not perfect (the regime is so onerous it’s almost impossible to have perfect compliance) and all will eventually come under the microscope. NAB were happy to dine out at CBA’s expense and look where it got them.
I do agree with comments on distribution. the middle manager execs drive the culture in the big instos and they have a lot to answer for. No mission statement or corporate jargon will save them this time.
I ask the same question I asked re ASICs pre- determined frolic on life insurance
If this was systemic, where the hell were the licencee AUDITORS. Are we to believe it all happened between two audits ?
Why aren’t the Directors of the Meritum AFSL in the dock. Why is the adviser the sole villain ?
Was the ” misrepresentation of products ” related to MLC/NAB products only ?
Gee Steve….are you going for the world record of most generalisations and wild assumptions per line.
When will big licensees stop chasing adviser numbers and do appropriate due diligence before recruiting? Nab took Meritum a number of years ago apparently “warts and all”, Suncorp did the same with AAA- now both have been found wanting. Didn’t stop the distribution heads pocketing the recruiting bonuses on offer. Confidence in advice firms has really taken a beating- We will all continue be tarnished by the crooks that really should have been drummed out of the industry, not welcomed with open arms by bonus- hungry licensee distribution!