New adviser reporting regime proposed

A House of Representatives committee has called on the government to establish an annual reporting regime for the wealth management industry, which would disclose details of individual financial adviser misconduct.

The House of Representatives standing committee on economics released its second report on the banking sector last week, calling on the government to implement 10 recommendations.

In one of these, the committee suggests ASIC establish an annual reporting regime that looks at the overall quality of the financial advice industry.

It would provide detail on misconduct by licensees, and name any representative or employee involved in addition to any consequences, the report states.


“The committee further recommends that ASIC report this information on an industry and individual service provider basis,” the report states.

According to the report, ANZ, CBA and Westpac have indicated support for this recommendation, although some raised concerns.

For instance, CBA noted that “we already advise clients of an adviser under certain circumstances. We believe that reporting on minor breaches could cause confusion and negatively impact confidence in the system”.

Meanwhile, NAB, which does not support the recommendations, called this recommendation “procedurally unfair”.

“Extending a report beyond settled prosecutions is procedurally unfair if cases are still being heard or considered by regulators,” NAB said.

“NAB believes that qualitative terms such as ‘quality of advice’ and ‘misconduct’ are not sufficiently defined metrics for the regulator to report on.

“As an alternative, NAB suggests an annual report on AFSL data such as complaints, levels of compensation, EDR statistics and the number of banned or formally sanctioned advisers.”

The committee said it rejects NAB’s position.

“In the best cases, poor financial advice leaves Australians’ investments and retirement savings facing elevated levels of risk,” the report states.

“In the worst cases, Australians have had their savings wiped out or incurred large debts. In the first report, the committee noted that poor financial advice has resulted in the CBA and NAB alone paying out approximately $85 million in compensation since 2009.

“Wealth management divisions of banks have been involved in misconduct far too often.”

In another recommendation, the committee calls for AFSLs to contact each of the clients of a financial adviser who has breached their obligations.

The report states that all banks broadly support this recommendation, but note that some lower level breaches may not warrant reporting.

“Our only concern with the recommendation is that some legal breaches are minor and/or inadvertent. These wouldn’t need to be reported to ASIC as they are not ‘significant’,” ANZ said.

“We think there should be a sensible threshold before licence holders need to contact clients. This is primarily to avoid unnecessary alarm.”

New adviser reporting regime proposed
New adviser reporting regime proposed
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