ASIC claims ‘long-standing’ concerns on planning

The Australian Securities and Investments Commission (ASIC) has sought to portray itself as having had long-standing concerns about the quality of advice being delivered by the financial planning industry well before the enforceable undertaking imposed on Commonwealth Financial Planning or the collapse of Storm Financial Limited.

In what will be the first of a number of submissions filed with a Parliamentary inquiry over coming months, the regulator said that by the time it had heard from whistleblowers within Commonwealth Financial Planning, it "had long-standing, publicly-expressed concerns with the quality of advice provided by the financial planning industry in Australia".

"ASIC's surveillance work, as well as our industry ‘shadow shops' (including in 2003 and 2006), demonstrated that poor quality advice was widespread in the industry," the submission said. "ASIC had publicly expressed these concerns prior to the major collapses that occurred in the financial advice sector, such as the collapse of Storm Financial, during the global financial crisis.

"At the heart of these problems were conflicts of interest embedded in financial advice distribution and remuneration that led to poor quality and inappropriate advice. Additionally, ASIC had flagged the need to raise professional standards in the industry," it said.

"Partly as a result of these concerns, ASIC undertook major financial advice surveillance projects on three of the largest industry participants: CFPL, AMP and Professional Investment Services. These surveillance projects ultimately led to enforceable undertakings with all three firms," the submission said.

The regulator acknowledged that it might have revealed sooner what actions it was taking around Commonwealth Financial Planning but used its submission to argue that, in any case, it had improved its procedures and practices since 2008.

In a statement accompanying the release of the submission, ASIC deputy chairman Peter Kell said the submission "acknowledges some processes in dealing with CFPL could have been quicker and more transparent, but we stand by the outcomes achieved".