Both documents were required from Commonwealth Financial Planning Limited (CFPL) under a Court Enforceable Undertaking (EU) entered into with ASIC in April 2018 in relation to CFPL’s fees for no service conduct, ASIC said in a statement.
As a result, CFPL is now required under the EU to immediately take all necessary steps to:
- stop charging or receiving ongoing service fees from its customers; and
- not enter into any new ongoing service arrangements with customers.
ASIC said the EU, which commenced on 9 April 2018 and was varied on 20 December 2018, required CFPL to provide to ASIC by 31 January 2019:
- a final report by the independent expert, Ernst & Young, on whether CFPL had taken reasonable steps to remediate customers impacted by CFPL’s fees for no service conduct and on the adequacy of CFPL’s systems, processes and controls; and
- to provide an attestation from a Commonwealth Bank ‘accountable person’ under the Banking Executive Accountability Regime as to CFPL’s remediation program, and the adequacy of CFPL’s systems, processes and controls.
On 31 January 2019, ASIC revealed that Ernst & Young issued its second report under the EU, identifying further concerns regarding CFPL’s remediation program and its compliance systems and processes – including that there remains ‘a heavy reliance’ on manual controls, which ‘have a higher inherent risk of failure due to human error or being overridden’.
Ernst & Young then recommended CFPL address these issues within a further 120 days, it said.
On the same day, ASIC noted that CBA’s accountable person provided a written update to ASIC on the remediation program and work being done in relation to CFPL’s systems, processes and controls.
Having regard to the concerns raised by the independent expert and the contents of CBA’s written update, ASIC then considered that the notification did not meet ASIC’s requirements under the EU for an acceptable attestation.
As a result, ASIC said its requirement under the EU that CFPL stop charging or receiving ongoing service fees and not enter into any new ongoing service arrangements, has been triggered.
ASIC included this requirement in the EU to ensure that if CFPL were not able to satisfy ASIC that the fees for no service conduct would not be repeated, CFPL would have to stop charging ongoing service fees so as to significantly reduce any further risk to clients.
It said existing clients will continue to receive services under their ongoing service agreements but will not be charged by CFPL.
Further, ASIC noted that it has received CFPL’s confirmation that it is complying with this requirement to stop entering into new ongoing service agreements and to cease charging existing clients fees under these agreements.
It added that the requirement will continue until CFPL is able to satisfy ASIC that all of the outstanding issues have been remedied. ASIC will be monitoring CFPL’s compliance with this obligation.
Finally, ASIC said it has been informed by CFPL that it is now in the process of transitioning its ongoing service model to one whereby customers are only charged fees after the relevant services have been provided, and will be monitoring CFPL’s transition to the new model.
hayne just decimated the mortgage brokers. sorry boys. welcome to our world
Wow. This is going to take a lot of presents and long lunches to fix. Never would have happened if Tim Mullally and Peter Kell had not been sacked. Bring back Tim and Pete and stand up for the CBA!
bring back Tim and Kell (the pencil necked turd)
Commonwealth Financial Planning has a self employed model called Pathways. I guess they are screwed now?
No longer under CFP.
yes they are
Considered part of FinWiz in the structure. Targetted to go with NewCo at the end of the year.
On the weekend the farmer puts some surplus fruit at the front gate to sell. CBFP having a pause on it’s adviser service fees is like the farmer being banned from selling his fruit on Sunday at the front gate. 1) it’s Chicken feed, 2) it’s not their core business and 3) It was never about financial advice it was always about the FUM./AUM.
Completely agree. In all the years, no one has ever questioned the product providers fees. Media is to stupid, regulators are to conflicted and the public is confused and very easily led.
You can always use low cost ETFs
It is interesting that despite having the Australian Competition and Consumer Commission (ACCC), whose task is to ensure competition is there for the economy and no cartel type behaviour is had, they appear to have been asleep.
Despite having the Australian Prudential Regulatory Authority (APRA) in place, they have presided over poor banking behaviour that has seen irresponsible lending now place Australia in one on the highest debt to equity ratio countries on the planet, presiding over a massive asset bubble we now have in property. If this blows, then so does our economy. Banana Republic perhaps on the way.
Despite having the Australian Securities and Investment Commission (ASIC), the oversight of the financial services industry is such that investment scams like Timbercorp, Trio Capital, Great Southern etc, were all aloud to continue, costing investors billions of dollars leaving their lives shattered. Here, to explain the incompetence, ASIC chose to either blame investors for their own greed or throw advisers under the bus and destroy either or both their lives.
Vertical integration, condoned by these fools and both sides of government, is a business model of value for some such as Amazon, but the consequences of a monopoly or in this case an oligopoly being created is of massive concern yet no one from either regulator world or a minister sought to do anything. She’ll be right.
Regulations such as LIF encouraged these greedy swill banks and ISN to continue conning a naïve public and or to pursue profits at all cost, destroy the lives of good advisers with the result now being less competition in the insurance space, poor offerings for insurance contracts, premiums rising for insurance as is the cost of advice with lower remuneration and profitability for advisers in general and nothing remotely resembling the promises made when FOFA was first launched for the hapless consumer all while advisers drown in compliance.
All along, these regulators, encouraged by nitwits in Canberra on both sides of politics were also on the take, receiving gifts from the very institutions they were supposed to be overseeing. My money is for Kelly O Dwyer to show up at a bank or the industry fund network.
Put simply, these regulators and ministers in a stew of incompetence with self interest at heart, allowed unscrupulous practices from direct sale insurers, industry funds, banks and all its forms of credit to carry on regardless. Don’t forget that Bill Shorten was the Financial Services Minister in 2011, when Trio Capital among others collapsed. This was a scam and should never have been allowed by ASIC.
And as I said, when it all gets found out, instead of putting a CEO in jail, the adviser and the client will be blamed.
Ministers will be moved to another portfolio, while a CEO that received massive levels of bonuses for essentially running a cartel that even the drug lord El Chapo would be proud of, would roam free looking to writet a book of tell all tales of business prowess.
Both sides of politics now say they intend implementing the recommendations put forward by the Royal Commission. How?
What will be the consequence in such recommendations on a practical level to the consumer and economy?
What will be the cost to industry?
How much will the client pay for advice and will this be inside or outside super ? Will the client be given a choice? Does the clients best interest come into it?
Last I recall, the cost of legal advice unless it is a business related matter is NOT tax deductable?
What of lawyers charging as much as 33% of the value of a TPD policy in a litigation? Will this be allowed to continue or are lawyers, protected species?
What of Trustee companies that charge up to 4% capital commission for the value of an estate and is this fair at law serving the clients best interest? Oh, but hey they will be dead, so no complaints there right?
There are many issues to wade through, yet these fools simply make a generic thought bubble comment of wanting to implement the recommendations without a thought to the consequence to the industry and its thousands of small business advisers, their staff and their clients.
It sounds tough in comment for the camera, but these are politicians facing a hostile electorate who are trying to save their necks.
Vertical integration was not a concept thought out by the consumer or the adviser. It was a business concept, thrust on the public by incompetent ministers, a foolish set of regulators that simply thought that greed by a few banks, the ISN and industry funds wouldn’t really be an issue. Right?
In short, this was naïve and arrogant in construct.
What a colossal collective joke. This is where our industry is folks.
Hey FPA and AFA, can we ask for our membership fees back? I believe that you really also stuck your collective heads in the sand for most part, selling us courses which have now proved to be worthless while your financial statements reveal that me thinks you were colluding with these very institutions that caused this disaster also. Thanks for selling us out. More the FPA here than the AFA. Your credibility is being hung out to dry. A reckoning nears.
Alistair for Prime Minister!!! Well said and sorry to say all true.
Very well said.
So Dover get shut down over a contract wording issue but a bank has customer advice issues but don’t get shut down? ASIC’s usual approach to their future employers.
Come on now Terry, we all know there was more to it than that
Disclose or retract your statement
I’m confused…which Anonymous is you Terry?
Don’t need to disclose just read the royal commission transcripts and the asic announcements
Nothing in there that points the finger at Terry any more than anyone else mate so tell me, what are you on about?
https://asic.gov.au/about-asic/news-centre/find-a-media-release/2018-releases/18-195mr-dover-financial-advisers-financial-services-licence-to-be-cancelled/
All I can see is they didn’t like the name of a document and had a personal dislike for the responsible officer – perhaps due to the fact Terry didn’t wine and dine them like the banks do.
Yeah nah. just these findings. See Terry, I can selectively copy and paste too.
Dover had failed deliberately and systematically for over two years to:
comply with its obligations to act efficiently, honestly and fairly;
comply with financial services laws; and
take reasonable steps to ensure that its representatives comply with the financial services laws.
ASIC considered certain terms of the Protection Policy to be detrimental to clients and unfair under section 12BG of the ASIC Act because the terms:
created a significant imbalance in the rights and obligations of the adviser and their client; and
were directed to protecting the interests of Dover and its authorised representatives in avoiding liability to a client for bad advice,
and that these terms conflicted with the obligations of an AFSL holder under the financial services law regarding client complaints and claims.
ASIC was also concerned that Dover lacked the organisational competency required of an AFSL holder.
if the glove doesn’t fit you must acquit.
Please expand and tell us all what it is you think Dover did wrong besides a poorly worded document that was changed and ASIC deciding that Terry wasn’t of good character….
“ASIC deciding that Terry wasn’t of good character” .. That’s all they needed. If Terry had offered to exit the business at the start, the result may have been different..
Neither side of Parliament will take on Industry Funds – you will have noticed that the industry fund ads are up and running again. We need a valid enquiry into Industry Funds conducted by non Politicians or their cronies – suppose as much chance of this happening as seeing a flying pig!!
That is because of how broke the financial planning sector is.
Get Adele Ferguson onto it…..bet she won’t touch it
Quote: It said existing clients will continue to receive services under their ongoing service agreements but will not be charged by CFPL
So how are the advisers being paid?
By the licensee, the business will absorb it, this is the employed channel
Correct!
Unfortunately logic and calm decisions will not occur today. Our livelihoods have become politized and everyone is ducking for cover. Ban this, ban that, but no one has provided a logical working solution for all with best intentions and doing their job right.
The irony in all this will be the clients will be worse off.
Proud member of the FPA. It’s now getting to the point where it’s like the AMA getting money from Tobacco companies.
And why wasn’t Dover allowed this wriggle room to fix the issues.. They just had the door slammed on their Licence and all their AR’s suffered and are still suffering.
Good to see you still care about your advisers Terry. How’s the collection of outstanding dealergroup fees going?
Is there anything else going on today that would explain the timing of this release from ASIC???
Probably a dozen more by close of business.
clap, clap, clap, clap, clap
ASIC deserves a heap of scrutiny coming out of the RC. Now they can point to a couple of scalps. I feel for the collateral damage, clients & advisers all left in the lurch by an incompetent regulator desperately trying to make up for a decade of incompetence.
IFA breaking news that’s actually worthy of being called breaking news? What the deuce!
Bang. So from today an adviser will not be paid BUT has to still provide the service!! CBA really supporting their aligned advisers.
Read the article before commenting, they are employed not aligned
This has huge ramifications for the entire industry
Why? You obviously haven’t been servicing your clients and or work for AMP.
Neither of the above, and thanks for the constructive comment
Can you 100% declare that your entire licensee has automated processes implemented and that there are no manual processes across all of the businesses.
No one can claim that and ASIC have the power to make decisons over a whole Licensee and not just individual planners
Maybe read the article before commenting next time
I suggest we all convert to the Industry Fund model ASAP – charge everyone a fee and deliver advice to only those that call, sell nothing but the “in house” product, stick everyone with Insurance with watered down terms and collect the commission and just so we don’t make a profit – spend up big on salaries and entertainment (Tennis sounds nice). And the best part, no more investigation from ASIC – just fling them some wine etc.
The advisors revolving door is the problem at CBA. The self employed advisor goes above and beyond for their client and deserves the remuneration they receive.
that has been a problem with employed advisers. high targets and incompetance. To your second comment, except to those advisers that keep getting Service fees for years for merely sending out a offer letter once a year. hardly above and beyond!
Are you talking about an Industry Fund charging everyone for Inter Fund advice and delivering to only a few?