The Association of Independently Owned Financial Professionals (AIOFP) has questioned disciplinary processes at the Financial Planning Association (FPA) in a letter made available to ifa.
The letter addressed to David Sharpe, the chairman the FPA, on 26 September by Professor Sarath Delpachitra, the chairman of the AIOFP, questioned the severity of a process launched by the FPA’s disciplinary committee against a jointly shared member over a “client portfolio valuation dispute”.
“It has come to our attention that your internal disciplinary committee has commenced action against a jointly shared adviser member over a client-adviser dispute well before AFCA [Australian Financial Complaints Authority] has released a determination on the matter,” Professor Delpachitra wrote.
“We are informed that your committee has issued [four] $5,000 fines for not acting in the best interests of the client and threatened expulsion from your organisation. We consider this as an act of prejudice,” he said.
Professor Delpachitra asked for clarification of the FPA’s standard procedure, and questioned whether the matter at hand was “an oversight by your committee”.
“We consider it a clear breach of natural justice, procedural fairness and common decency,” he said.
“We also believe that your committee’s conduct is unnecessarily vexatious causing severe mental health problems for the member. Suffice to say the member is seeking legal advice over your committee’s conduct regardless of the final AFCA determination. We intend to support the member while respecting the outcome of AFCA”.
Having not received a response, the AIOFP’s executive director, Peter Johnston, issued a statement to members earlier this week, accusing the FPA of mistreating their joint member and intensifying the mental pressure on the individual who was “understandably distressed and sought professional help”.
In the statement, made available to ifa, Mr Johnston wrote: “The irony is AFCA eventually ruled in favor of the adviser but the client has appealed therefore delaying a final decision. The members name must remain confidential until the appeal is completed but the fact is, regardless of the appeal outcome, the FPA disciplinary committee acted before an AFCA determination depriving this member of natural justice, procedural fairness and common decency.”
“We want to assure the market and our members that the AIOFP believes ASIC should be the only entity dispensing monetary and other penalties to advisers,” he continued.
Mr Johnston further disclosed that the member would be seeking legal advice, regardless of the AFCA outcome, for alleged “stress and harassment” caused by the FPA.
“These circumstances strongly suggest that any future Professional Standards body of any description should be an independent entity with no Association management involvement. There is just too much potential for discriminatory, bullying and conflicted behavior in a market that is still divided by institutional partisan influence”.
FPA responds
In a response provided to ifa, FPA CEO Sarah Abood strongly denied the AIOFP’s assertions.
“The FPA has become aware of some inaccurate information communicated to members of the AIOFP,” Ms Abood said.
“While the FPA can’t comment on an individual case while it is still subject to the disciplinary committee, we can explain the FPA investigations process, what opportunities there are for members going through this to access support, and how we ensure members’ evidence and views, are respected and considered,” she noted.
Citing concern over reports that the member in question is suffering mental health problems, Ms Abood assured that “all FPA members have access to confidential wellness support as part of their FPA membership”.
Turning to the FPA’s disciplinary operations process, Ms Abood said that the FPA’s internal team first investigates any complaints against members, and if that team believes there is a case to answer, the matter is then referred to the Conduct Review Commission (CRC).
“This body is funded by the FPA but operates independently, which we believe is critically important to ensure arms-length decision making and due process for members,” she said.
“If a member has concerns about the way that the CRC has managed a matter, they can ask for a review of the decision, via a written request to the Investigating Officer within 21 days of a CRC panel determination,” Ms Abood explained.
According to Ms Abood, before pursuing this investigation, the group received confirmation from AFCA that concurrent investigations can be run without prejudice to the member.
“This is because the FPA’s processes are separate from those of AFCA and assess against different criteria,” she said.
Regarding the assertions made by the AIOFP concerning the fines imposed on the FPA member, Ms Abood said that “fines are infrequent and are only issued in cases where the panel members believe that the member’s conduct has been particularly egregious”.
“However, this would not take place until the evidence has been fully considered by the CRC and a determination made — this will include consideration of any evidence put forward by the member.
“Members are also given every opportunity to participate in the disciplinary process, including appearing before the CRC panel and stating their case”.
The FPA process seems to be just another doubling up on the already rigid AFCA and ASIC processes. I don’t think we need another regulator in the industry. A big thanks to the FPA for offering another layer of compliance to deal with but I think I will save my money.
PS: I wonder if the board and staff at the FPA are held to the same level of account that they expect of their fee-paying members?
Thea supposed fines the adviser has to pay go to who go to where?
Surely due to the imposing of the member fine, the FPA determined the conduct to validate the term “particularly egregious”. But then we learn that AFCA voted in favour of the adviser and against the client ? Funds from AFCA determinations are onforwarded to remediate client experiences. But FPA committee issued fines …
However, this would not take place until the evidence has been fully considered by the CRC and a determination made — this will include consideration of any evidence put forward by the member.
“Members are also given every opportunity to participate in the disciplinary process, including appearing before the CRC panel and stating their case”.
Does this mean that the FPA will indemnify the member for costs incurred in providing “[i]any evidence put forward by the member.”? [/i]
If the member chose to be represented, which is their legal right, who would pay for the members costs, if the investigation was dismissed?
I know my KC doesn’t open a file for less than $10,000 a day and that doesn’t include the solicitor’s fees!
If the FPA want to review the matter as disciplinary in respect to membership that’s one thing but to impose monetary penalties is just another way the FPA takes money from advisers to act as a community advocate rather than representing the advisers it claims to be a professional body for. The primary reason I left was because the FPA is conflicted in that they cannot act for both parties without a conflict of interest. Choose a side FPA you cannot be all things to all people.
Well, If members of both organisations think that squabbling like this does no-one in the industry any good ? You’re welcome to join cifaa.asn.au 🙂 – for S 923a independent advisers . This is what happens when turf wars are fuelled by CEOs and ogansiations that relly on members paying big $ to keep them open – for what? They’re all pretty much ignored by the policy makers and regulators these days and when you see stuff like this playing out, you wonder why? Run by members for members is the cifaa catch-cry. No CEOs on our pay-roll.. (Gratuitous plug over)
“The FPA’s processes are seperate from AFCA”. Sounds like Cameron Smith debating a decision with the referee. AFCA is the referee.