‘Hidden and challenging’: FAAA highlights advisers’ role in recognising financial abuse

FAAA has endorsed the ATO’s invitation to provide feedback on the Vulnerability Framework, highlighting the need for greater guidelines for advisers to follow in cases of financial abuse.

Responding to the Australian Taxation Office’s consultation paper on its vulnerability framework, the Financial Advice Association Australia (FAAA) acknowledged the important role of financial advisers in addressing financial abuse, however it noted the need for clarity around how the profession can handle the issues when they arise.

Though expressing concern for all financially vulnerable individuals, the FAAA drew particular attention to those facing financial abuse.

According to the Australian Bureau of Statistics, 16 per cent of women and 7.8 per cent of men will experience financial abuse in their lifetimes.

“Financial advisers are uniquely positioned to detect signs of financial abuse,” FAAA general manager of policy, advocacy and standards Phil Anderson stated.

“[This is due to] their close relationships with clients and their families,” he added, highlighting the need to end what the FAAA called a “serious and insidious form of domestic and family violence”.

According to the FAAA’s submission, members had noted in response to the earlier Parliamentary joint committee inquiry into financial abuse that the financial services industry lacks guidelines and protocols on handling cases where abuse is identified.

This includes how to approach clients, who to report abuse to and what legal protections are available for both clients and advisers.

“Despite the lack of guidelines on how to respond, the FAAA suggests that all participants in the financial system should be alert to victims of financial abuse,” Anderson stated.

With this statement, the FAAA also included its responses to the feedback questions, largely endorsing the initiative, stating that the “guiding principles are excellent: well framed, concise and reassuring to the reader”.

“The FAAA applauds this initiative by the ATO, and is highly supportive,” it said.

However, the response also included feedback on what the FAAA believes can be improved.

One example is the FAAA’s belief that “the Draft Framework could benefit from one or two practical examples of how a client’s situation might make them vulnerable, and how the ATO would act in the specific situation”, particularly around “age-related or language-related limitations”.

It also highlighted that the draft would benefit from greater detail on what a financial professional, including an adviser, is able to do to help a vulnerable person. The FAAA suggested adding ideas for tailored support, such as “offering flexible options where possible, explaining information clearly, or referring someone to another service for help”.

“Financial abuse is often hidden and challenging to identify, making it a difficult issue to address,” Anderson emphasised.

“Many victims may not even realise they are being abused, especially if the abuse is subtle or if it occurs within familial relationships where trust is implicitly granted.”

It is because of this that financial advisers are in a unique position to be able to identify where this kind of abuse may be taking place, typically being intimately familiar with a client’s finances, but lacking the guidelines on how to act if they sense something is wrong, with many in the FAAA wanting this to change.

“We are keen [as a profession] to do all we can to stop this serious and insidious form of domestic and family violence,” the submission said.

The FAAA has already called for “consistent” protocols in the past, stating that there was a “lack of recognition” toward the barriers faced financial advisers in terms of being able to assist clients in these matters. The FAAA has also made a submission to the joint parliamentary committee on corporations and financial services’ inquiry into financial abuse into financial abuse.