ASIC’s punishment of Findex for “misleading claims” on its website shows the regulator is still barking up the wrong tree.
For much of the past decade, ASIC’s enforcement activity in the financial advice sector has focused largely on smaller, non-aligned licensees.
During this same period, as many as 8000 of the Commonwealth Bank’s financial planning clients – or should I say customers? – were allegedly being ripped off by ‘advisers’ acting in line with in-house sales incentives, with similar occurrences at NAB Wealth and ANZ.
It wasn’t until brave souls like former CBA planner Jeff Morris and other whistleblowers teamed up with the media and a select few pollies from across the aisle – Labor’s Sam Dastyari and the Coalition’s John ‘Wacka’ Williams chief among them – that the issue of unethical and illegal behaviour within the institutional advice arms was forced to the top of the agenda.
Faced with an inquiry into its own inaction, ASIC then changed its tune, announcing it would be focusing on the largest vertically integrated players, and specifically on the culture of cross-selling and product incentives within their financial advice businesses.
The non-aligned sector cheered the announcement, with many small licensees and IFA firms looking forward to some breathing space so they could actually focus on servicing their clients instead of being grilled by smug government lawyers all day.
And, to be fair, that probe – which is ongoing – has claimed a few small scalps a fair way down the food chain, with authorised reps of AMP’s Charter and ANZ’s Millennium3 copping a bollocking in late 2015.
However, in March of this year, the corporate regulator announced it was reverting course to its sweet spot, on the hunt for firms misusing the all-important protected term “independent”.
Yesterday it was announced that as part of that investigation, the Findex Group has paid a fine of more than $20,000 for making “misleading claims” on its website to be an “independent” and “non-aligned” firm.
In a statement, Findex said it only used the terms “independently-owned” and “non-aligned”, which are not specifically outlined in the Corporations Act. But putting the ‘he said, she said’ to one side, this development signals ASIC’s intention to crawl back into its comfort zone of the IFA space.
The regulator has deemed marketing language used on a website that – frankly – not too many consumers will frequent to be of higher importance than all of the rampant conflicts that continue to go on in the institutional sector: from highly conflicted Buyer of Last Resort (BOLR) arrangements within insto dealer groups to sales training programs masquerading as “financial planning academies”.
Now, I’m not saying that Findex is a saint in all of this. The term “independent” is clearly defined and protected under law in the Corporations Act and for those advisers that have taken the very expensive steps to remove all conflicts from their business so they can use this term, misuse by others is clearly unfair.
But, the terms “independently-owned” and “non-aligned” are not specifically defined in the law, and more importantly, these terms do not suggest that a firm is free of commissions, as ASIC suggests. Instead, these terms speak to ownership and whether advisers in the relevant company make their own decisions or take their cues from corporate boardrooms – a more important issue for consumers than whether they take risk commissions or how educated they are in my humble opinion.
Surely actual wrongdoing that I daresay is going on currently is more important than potential confusion that might come from sloppy marketing?
Surely ASIC has bigger fish to fry, given their own announcement that they would start to scrutinise the big end of town (if a few decades too late)?
But of course, larger fish are far more difficult to fry and ASIC needs to meet its KPI of enforcement actions for the year. With their armies of legal eagles and executives fluent in bureaucratic psychobabble, the institutions are better insulated against ASIC and harder to investigate.
ASIC has made its disdain for financial advisers clear – Greg Medcraft’s unprofessional and slightly spectral spray at the National Press Club in 2014 was all the evidence we needed of that.
And within that troublesome profession, the non-aligned sector is disliked most of all. Not because it is more non-compliant, but because a decentralised market is inconvenient and expensive to regulate, as ASIC accidentally admitted here.
Marketing matters, and all advice firms should think of consumers first and foremost when promoting and producing their services.
But if the regulator thinks this is the biggest compliance issue facing consumers then it clearly hasn’t been paying attention.
Maybe it should think a little bit more about whether its own activity is “unbiased” and “impartial” and less about the website copy of low hanging fruit.
Aleks Vickovich is a contributing editor at ifa
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