MP flags concerns licensees can’t deal with advice risks

ASIC has been questioned by a government MP over concerns whether any advice licensees would be able to effectively monitor and supervise advisers based on its current key risk indicators.

At a parliamentary joint committee on corporations and financial services hearing yesterday, member and Coalition MP Bert van Manen asked ASIC about Report 515, Financial advice: Review of how large institutions oversee their advisers.

In particular, he asked ASIC about appendix four of the report where it identified key risk indicators for monitoring and supervising advisers.

“I'd be interested to know what if any work you were doing in at least a preliminary fashion with the industry to identify whether advice licensees actually have the capacity and if so what capacity to actually identify and deal with any of these key risk indicators,” Mr van Manen asked.


“I'm concerned that I don't believe that any licensee in the industry or very few if any actually have the capacity to produce a report for you as a regulator that could show that they are able to address all of those key risk indicators in a timely fashion and therefore I'd have concern about their capacity to hold a licence if this is what's going to be applied by ASIC in its reviews.”

According to appendix four, the key risk indicators are put into categories according to product or advice type, adviser profile, customer profile. Some of the risks cited by ASIC include high ratio of records of advice to statements of advice provided to customers, adverse adviser audit outcomes, and a high percentage of advice to elderly or vulnerable customers.

Before adopting the key risk indicators, ASIC suggested advice licensees should consider:

  • Identifying the available data;
  • Determining which data sources will provide reliable data;
  • Choosing appropriate key risk indicators;
  • Ensuring appropriate testing is undertaken when setting thresholds for the key risk indicators; and
  • Monitoring and testing key risk indicators and relevant thresholds on a regular basis.

In response, ASIC executive director of wealth management Joanna Bird said a lot of licensees find Report 515 to be very helpful.

“They're the sorts of issues that they're taking into account when they're doing the current industry standard of actually sitting there and reviewing a sample of a financial adviser's files. So that's how it's being used in most circumstances now,” Ms Bird said.

“However, a number of licensees are as you've intimated quite rightly looking at technological solutions that will help them do this a lot better.

“This year ASIC had a regtech event where we got a large number of providers in who are trying to provide those solutions and they sampled them and showcased them so we're working with both the regtech providers and the industry to help them make these processes [as] automated as it can.

“But even if while those things are still in development, licensees are able to use this sort of information to help them conduct their sort of manual audits of advisers.”

MP flags concerns licensees can’t deal with advice risks
MP Bert van Manen
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Adrian Flores

Adrian Flores

Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.

You can contact him on [email protected].

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