The problems and issues plaguing the financial advice industry are systemic issues and cannot just be dismissed as a case of a small number of bad apples in the industry, the Australian Securities and Investments Commission (ASIC) deputy chair, Peter Kell said.
Speaking at the 2015 Association of Financial Advisers’ conference in Cairns, Kell said the issues not only stemmed from poor structures that aided such behaviour, but arose from genuinely poor advisers or advisers who were engaged in misconduct.
“I think we’d all be kidding ourselves if we said the problems in the industry are just the result of a small number of bad apples. I think there have been more systemic issues,” he said.
A major issue identified by ASIC was that organisations and people had not identified the poor advisers or breach reported them, and when those advisers moved on to different firms, there were no references indicating their past behaviour.
“Well, if that hasn’t occurred, then frankly, it’s not bad apples, it’s a wider problem,” he said.
Kell said that while ASIC did not expect perfection in the industry, it did expect organisations to act promptly to rectify problems, support the client teams or whoever it is that identified and reported the issues, review systems to ensure it is a one-off incident rather than a systems issue, deal with conflicts of interest, and maintain transparency with clients.
“Or do you basically fail to do most of those things? If it’s a bit embarrassing, we might just move the person on, or if they’re doing really well for us, we’ll just give them a little bit of a behind-the-scenes talking to,” Kell asked.
Kell also wanted to see firms adopt a whistleblower policy that protected whistleblowers, enabling them to feel comfortable in identifying problems and reporting them to those higher up in firms, and a culture that rewarded them.
