ASIC flags breach crack-down
The Australian Securities and Investments Commission (ASIC) has issued a further warning about poor culture within financial planning organisations and urged that remuneration incentives be based on good culture rather than sales.
The warning has come as the regulator has flagged a major review of breach reporting and an intention to more closely examine what it described as high risk licensees who may then face enforcement action.
ASIC deputy chairman, Peter Kell told a risk management conference that where the regulator saw "business models and incentive structures undermine a focus on better consumer outcomes we are likely to examine that organisation more closely"
"Lessons from the global financial crisis (GFC), and from ASIC's experience in administering and enforcing our financial services and markets law more broadly, tell us that culture matters. And it matters in very concrete ways — for example, in remuneration and incentive structures for employees, and in the way that products are designed and marketed," he said.
"If a licensee has a poor culture of compliance, there are likely to be breaches of the law. Poor culture also undermines customer trust and confidence in a licensee. Ultimately, this will impact the licensee's bottom line," Kell said. "More broadly, sector-wide cultural problems destroy consumer trust and confidence in the whole sector. And in the financial services sector we see clearly that the problems created by poor culture can have a very long tail due to the long-term nature of products and services."
He said this was an issue the financial planning industry was facing at the moment.
"At ASIC, where we see that business models and incentive structures undermine a focus on better consumer outcomes we are likely to examine that organisation more closely," Kell said. "… An organisation's culture will also affect what regulatory outcome we pursue. The poorer the culture, the stronger the action we are likely to take."
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
