Johnston argued that the long-standing focus on financial advisers as scapegoats has allowed other stakeholders – including ASIC, APRA, trustees, custodians, auditors, research houses, and institutions – to evade responsibility.
“For the last 30 years MIS has protected ASIC from litigation with their ongoing flawed conduct but it has thrown taxpayers ‘under the bus’ with consumer protection,” Johnston said.
He said the problem is systemic.
“ASIC/APRA, trustees, custodians, auditors, research houses and institutions have evaded accountability with their role when financial products fail, they have cleverly, unfairly and most times collectively spun the blame onto financial advisers whilst slithering away for legal cover,” he said.
“This ongoing injustice has allowed mediocrity to develop where the structure and habits of these stakeholders have not changed – why would they when they have continually avoided culpability with their conduct?”
Johnston referenced historical precedent, noting that the 2011–12 Senate inquiry into the 2009 “TRIO fraud” found multiple stakeholders collectively responsible.
“Today precisely the same stakeholders are emerging as the culprits in the Shield/First Guardian fiasco,” he said.
The email coincides with heightened regulatory action against some parties involved.
ASIC has recently targeted Equity Trustees and is expected to take action against Macquarie and Netwealth in the near future, raising questions over who will hold the regulator itself accountable.
“How can the supreme regulator take no responsibility for allowing flawed products onto the market in the first place and then take no responsibility for the conduct of stakeholders who are meant to be protecting consumers? What does ASIC actually do besides for being reactive to problems and attack low-hanging fruit?” Johnston asked.
Johnston also criticised the levy charged to advisers, which he said effectively charges advisers to investigate failures for which ASIC is ultimately responsible.
“To make matters worse, they then charge the advice profession a levy to investigate product failures that they are ultimately responsible for,” he said.
Johnston concluded the email with a call for a royal commission into ASIC and the managed investment scheme process, arguing that systemic reform is needed to protect consumers and restore trust in Australia’s financial services industry.
“It is time to drain the Canberra bureaucratic swamp with a royal commission to protect consumers.”
Johnston’s email comes in the wake of CEO Garry Crole’s Operational Risk Financial Requirement (ORFR) initiative, which the AIOFP head said has shifted the spotlight firmly onto the role of all stakeholders in product manufacturing and distribution – not just financial advisers.
Namely, Crole – who is also a non-executive director at the AIOFP – confirmed that Sequoia is pursuing remediation for clients affected by the Shield and First Guardian collapses by seeking access to APRA-mandated ORFR reserves.
“Use of the ORFR to remediate member losses would reinforce trust in Australia’s wealth management and superannuation industries,” Crole said.
“While it is essential that those who misled trustees, research houses and licensees are called to account, the Australian superannuation system has evolved to safeguard members and those safeguards must be fully utilised.”
One of the licensees potentially facing regulatory action is InterPrac – a wholly owned subsidiary of Sequoia – which previously authorised Ferras Merhi and Venture Egg until severing ties at the end of May, as well as Reilly Financial and Miller Wealth Group, which allegedly advised clients to invest in one or both funds.
Despite this, Crole has stressed that InterPrac has taken “decisive action on some breaches of three practices that we had within the network” and is actively supporting affected clients.
Financial advisers have been devastated by a combination of a failure of public policy, politically expedient legislation and lack of oversight of the regulator by a previously incompetent Coalition government. The decade of “reforms” have proven to be ill conceived, poorly implemented and executed. Despite continued reports by professional financial planners to the regulator of inappropriate investments and misconduct, the regulator evaded all responsibility.
It is wholly appropriate that Peter Johnston and the AIOFP highlight this issue and he should be congratulated on his stance.
Absolutely! Royal Commission! Please take a deep dive into the below:
ASIC should review the case and properly investigate the financial planner they crucified (lost their houses, savings and nearly lost family and suffered significant distress through this experience until now) for alleged churning of insurance products. Through some bogus complaint (severely manipulated & incomplete misleading information) regarding this financial planner, they alleged the financial planner churned insurance products and put clients into an inferior product and claimed commissions from it (Superiors received ALL the commissions as per evidence, was an employee). Evidence shows new life insurance products clearly had more features and benefits and monthly premiums was significantly lower and had a reference number before assessment for every single file. This financial planner was on a quarterly bonus structure and did not receive upfront or ongoing commissions in the 4yrs.
Materials severely manipulated to make it look like this financial planner was a crook. This financial planner had no compliance breaches in the 4 years was employed, 100 plus good character references from the community and industry & had all the awards, 3 independent experts was hired to investigate the matter and turns out there was no formal / verbal warning of any breaches and other financial planners were doing it and still practising. The transfer form provided was the incorrect form and had no date. The correct transfer form was generated after this financial planner left.
ASIC stated “retraining and monitoring” could have been appropriate remedial response following a proper investigation which revealed the true facts” Why wasn’t this done in the first place?!
They should, through the lens of not scapegoating advisers.
Yes ASIC should be investigated for their failure to stop these product failures much sooner. They should also be investigated for their failure to stop the Dixon Advisory disaster much sooner. That should have been super easy for them as Dixons were marketing heavily to Federal Govt staff.
Brilliant move by Peter. Well done mate.
Hear hear! About time someone called them out!
Dear Peter and the AIOFP,
What a wonderful idea to have the supreme Regulator and all the others in the financial chain held accountable.
We can only wish it would happen.
Canberra’s ASIC with the FSC insto donations will be trying their very hardest to continue to stay the course of the last 30 years and blame = Financial ADVISER only.
Rule no.1 from ASIC and Insto’s = It’s ALWAYS the Financial Advisers fault.
Here here Peter