The corporate regulator has imposed additional conditions on the Australian Financial Services Licence of an advice network after it noticed a significant rise in advisers in a relatively short period of time.
As part of ASIC’s surveillance on SMSF Advisers Network (SAN), ASIC reviewed a number of SAN’s client files. The review identified concerns including that some of SAN’s advisers had failed to demonstrate compliance with the best interests duty and related obligations.
ASIC found that the statement of advice (SOA) documents relied heavily on templated wording and many of the client files lacked evidence to support the advisers’ recommendations that clients establish a SMSF.
As a result, ASIC was concerned that SAN had inadequate supervision processes in place to ensure that advice provided by its representatives was in the best interests of clients.
“The additional licence conditions require SAN to engage an independent expert to review and test the compliance of advice provided by SAN’s advisers and to assess whether SAN has appropriate supervision mechanisms in place to ensure that its advisers are meeting the best interest duty and related obligations,” ASIC said.
“Where shortfalls in supervision arrangements are identified, the independent expert will make recommendations to address the deficiencies.”
ASIC said AFS licensees are responsible for the conduct of their representatives, and expects them to have adequate supervision arrangements in place to ensure that their representatives comply with the law when providing financial product advice to consumers.
Further, it said it is essential that AFS licensees’ resources remain adequate, especially during periods of strong growth, to ensure compliance with their obligations, that ASIC will continue to monitor movements in adviser numbers when targeting future surveillance work.
“When providing SMSF advice, financial advisers are required to adequately demonstrate why an SMSF is appropriate for the client and why it is in the client’s best interests. ASIC expects financial advisers to use their skills, expertise and judgement in determining whether an SMSF is appropriate and not rely solely on client direction,” ASIC said.
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