While former advisers working for collapsed firm Storm Financial may have been compliant their actions were not true to the spirit of the law, according to boutique firm Quantum Financial.
Speaking with ifa, Quantum Financial principals Tim and Claire Mackay said ethical models can be taught and potentially adopted, but that someone is either ethical about how they do business or they are not, citing Storm Financial as an example of the divergence between compliance and ethics.
“Storm was true to the letter of the law but not the spirit of the law, and that’s where morality or your sense of ethics comes in,” said Tim Mackay.
His sister and business partner Claire – who has intimate knowledge of the Storm matter as a former industry representative on a related Financial Ombudsman Service panel – said that it is not enough to simply be compliant.
“We don’t have to have degrees to do what we do,” Ms Mackay said. “All we need is RG146. But is that really providing the best service to clients?”
Ms Mackay said that FOS had been inundated with cases following the GFC relating to Storm Financial as well as other collapses such as Legacy and Westpoint.
Quantum Financial has been a longstanding advocate of ethical financial planning and is a previous recipient of the Excellence in Business Ethics NSW State Award.
The comments follow a debate sparked by comments by financial services lawyer Peter Bobbin that the Storm case reminds advisers of the important distinction between ethical behaviour and compliant behaviour.
Having been contracted to review statements of advice issued by Storm advisers, Mr Bobbin said the documents had been “very compliant” but possibly unethical and in contravention of the “duty to the client”.
“Storm was a clear example of unethical behaviour driven purely by greed,” said one reader responding in the comments feed. “Any planner that had half a brain could see this trend and it was obvious to all that one strategy did not fit all- there in basic form is the ethical issue”.
Another commenter, describing herself as a “Stormie”, said the Storm Financial model SOA had been a “generic document which said nothing about how much or where money was to be invested”.
Former Storm adviser Wally Fullerton-Smith appeared in a Sydney court yesterday, charged with making false and misleading statements to obtain financial advantage.
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