Despite financial advisers being uniquely positioned to detect financial abuse, the industry lacks consistent protocols to help them respond when they suspect a client may be facing this type of abuse.
FAAA chief executive Sarah Abood believes privacy laws and insufficient whistleblower protections also hinder advisers’ ability to report suspected cases if and when they come across it.
In its submission to the parliamentary joint committee on corporations and financial services inquiry into financial abuse, the FAAA put forward seven key recommendations to help reduce the impact of financial abuse:
- Take action to raise public awareness of financial abuse.
- Create a central source of training, information and support for affected people, including the financial professionals who are the “frontline” in identifying this abuse.
- Establish a hotline for consumers and service providers.
- Review the privacy and whistleblower protection laws to ensure relevant information can be safely shared, where financial abuse is suspected.
- National harmonisation of currently state-based estate planning laws.
- Establish a national register of powers of attorney.
- Develop a standard identification, reporting and escalation framework.
“By implementing these recommendations, the FAAA believes we can create a safer financial environment and empower financial advisers with the tools and support they need to protect their clients from financial abuse,” Abood said.
She noted that “financial advisers are uniquely positioned to detect signs of financial abuse” given the close nature of adviser–client relationships and their thorough understanding of their assets.
“Despite this, research conducted by the FAAA alongside members shows that there is no clear method of reporting or assisting clients who are subject to financial abuse,” Abood added.
“Through clear guidance, training, and support, financial advisers can help protect clients and other family members from financial abuse and support them in regaining financial independence.”
She also highlighted the complexity of financial abuse, noting that it can present in a multitude of ways, such as unauthorised transactions, coerced changes to wills or financial documents, or exploitation of financial resources,
“Financial abuse is often challenging to identify, making it a difficult issue to address. Some victims may not even realise they are being abused, especially if the abuse is subtle or if it occurs within families,” Abood said.
The FAAA wants to do all in its power to “stop this serious and insidious form of domestic and family violence”, she said, and help protect “vulnerable Australians” who may be suffering from abuse.
According to the Australian Bureau of Statistics, 1.6 million women and 745,000 men have reported experiencing financial abuse. Financial abuse is recognised as a form of domestic violence in both state and Australian federal laws.
It is very difficult to report financial abuse due to privacy legislation. Financial abuse happens more regularly with older clients subjected to pressure by their children in my experience. The powers that be just won’t allow it to be reported if the older person has capacity. Unfortunately older clients with capacity don’t want to report their children. It would be a step forward if advisors could report financial abuse for investigation whether or not a client has capacity.