ifa reported last month that IOOF had cut ties with 33 out of 48 planners licensed under My Adviser because they did not meet certain requirements. The other 15 advisers who passed the due diligence procedure were moved under the Consultum licence.
During a Senate hearing in Sydney yesterday – chaired by Labor Senator Sam Dastyari and joined by Liberal Senator Sean Edwards, Nationals Senator John Williams and Liberal Senator David Bushby – the committee asked IOOF whether it had looked to see if those planners gave poor advice.
“If [the advisers] are being cut free for not living up to the culture or the quality of your company, and they gave bad financial advice and clients lost money, are you looking through those books or files of those that have been shoved off to consider compensation?” asked Senator Williams.
IOOF company secretary Danielle Corcoran – who fronted the committee along with IOOF chairmen Roger Sexton and head of investigations Rob Urwin – answered by saying that those clients are not her company’s responsibility.
“The clients are the clients of the adviser. So we no longer have the adviser and the clients transfer with the adviser,” she said.
“They’re authorised reps so they are on our licence but not subject to employment law. And we have standards and if they don’t meet our standards then we no longer want them associated with our business.”
Yesterday’s hearing follows allegations of front-running and insider trading at IOOF sparked by Fairfax Media news reports.
Last month, the committee grilled IOOF managing director Chris Kelaher, who said there was no systemic failure at the $2.6 billion financial services giant that required it to inform ASIC.
Mr Kelaher said a PwC inquiry earlier this year found no evidence of front-running detected. However, that report showed the investigation was narrow in scope and PwC has assumed no responsibility for the accuracy or completeness of the information in the report.
Yesterday, Mr Sexton said a majority of the alleged compliance breaches reported in the media occurred at Australian Wealth Management (AWM) before IOOF became owner of the company.
He also said he would be taking action for defamation by the media.
“I am extremely concerned about the misreportings that has occurred in the press, that is involving IOOF. I got three separate calls from journalists, I had given them an answer and they printed the exact opposite in the press. That’s outrageous,” he said.
“Who loses money in this situation are the small mum and dad investors.”
[quote name=”Roger T”]I am struggling to understand IOOF’s answer. If the advice took place whilst those advisers were under the IOOF license then IOOF are jointly responsible, with the adviser, for that advice. There is no doubt that if a client lodges a complaint for poor advice the responsibility for that advice will be dated back to the date of the incident. There is a moral responsibility on IOOF to conduct reviews of the advice given but those advisers and it would send a good message to the clients if they wrote to each client and offered to review the advice given.
What is IOOF covering up? Dare I suggest that Corcoran, Sexton and Unwin are not examples of good witnesses.[/quote]
Roger T – you have made some assumptions here that may not be remotely correct. There is no suggestion of incorrect advice. Secondly, IOOF purchased the licensee, and upon further investigation, decided that several advisers didn’t suit their culture or direction or standards. If there was advice they didn’t like, it was unlikely (but possible) that the advice was given during the short period they were under the IOOF banner. Just to note – there is a BIG difference between advice that is wrong/illegal/non-compliant, versus advice that you disagree with or wouldn’t use yourself.
The suggestion that a company that buys a licensee, does due diligence and decides that some advisers are not a good fit, should then turn around and investigate EVERY single client going back 20 years hunting for something wrong is hardly realistic.
If you ever bought a book of business, would you investigate EVERY bit of advice ever received by your new 300 clients and then seek to compensate them if you found anything less than ideal with the advice given by a previous adviser?
Nor would IOOF – It would take years to investigate thousands of clients thoroughly, and is not their responsibility as they only had a temporary relationship with the advisers & clients.
[quote name=”TD”]Roger T, why the immediate assumption that the advisers let go had done anything wrong. Seems to be a leap that the media commonly likes to make. Dealerships cut ties with business’s and vice versa on a daily basis due to cultural fit, size and scale etc. Have I missed something?[/quote]
You are correct but in this case the quantum of advisers terminated and the other issues in the IOOF case that raises governance concerns and puts a magnifying glass on the company. There is far too much smoke that it would be prudent for them, and the industry, to one the front foot and show good governance. Better to find nothing wrong with the advice now than problems in the future.
When will the Bridges model be brought to account. Everyone knows that’s the core of the issues for IOOF.
When is the industry going to investigate the managers that originally sanctioned these planners. IOOF a inherited MyAdviser planners from a group they purchased called Plan B.
Roger T, why the immediate assumption that the advisers let go had done anything wrong. Seems to be a leap that the media commonly likes to make. Dealerships cut ties with business’s and vice versa on a daily basis due to cultural fit, size and scale etc. Have I missed something?
I understood that legally the clients belong to the licence holder who is responsible for the advice given. Best interests puts some obligations onto the adviser but the licence holder is ultimately responsible.
I’d imagine ASIC might be interested in these comments.
I was under the impression that the AFSL actually is responsible for the client and the Adviser is just a representative of the AFSL. I know a case whereby an AFSL had to pay $250,000 for the dishonesty of the AR based on this point so I cant understand how IOOF can just walk away from the responsibility.
I am struggling to understand IOOF’s answer. If the advice took place whilst those advisers were under the IOOF license then IOOF are jointly responsible, with the adviser, for that advice. There is no doubt that if a client lodges a complaint for poor advice the responsibility for that advice will be dated back to the date of the incident. There is a moral responsibility on IOOF to conduct reviews of the advice given but those advisers and it would send a good message to the clients if they wrote to each client and offered to review the advice given.
What is IOOF covering up? Dare I suggest that Corcoran, Sexton and Unwin are not examples of good witnesses.
This is the same predictable pattern of this Senate committee and it dosnt take long before they are bagging FPs or insinuating bad advice. Wasn’t this a story about IOOF research house?
This Senate committee will link Advisers to the outbreak of SARS or even AIDS if where not careful.
I agree with your comment Perspective. This is a witch hunt
Not ONE licensee, even independent ones, would even consider doing this.
Scenario – a licensee finds an example of poor advice or poor culture with an adviser, and doesn’t want a relationship with them.
Would ANY licensee then investigate EVERY single client of the adviser that they have ever had?
No. Way.
It would also open up all sorts of legal fights – if a company ceases a relationship with a representative, and then tries to poach the clients that belong to the adviser.
Imagine if you were a bank adviser, you moved to another licensee, and then the bank approached all your clients and tried to steal them and give them to current bank advisers.
There would be an uproar and it would go straight to court.
The fact that this is promoted as ‘news’ and used to make IOOF look bad is beyond a joke.