ASIC warns tied advisers: we are watching

TheAustralian Securities and Investments Commission(ASIC) is conducting a surveillance campaign of tied advisers that could yield results as damning as the recent report on advice quality it released with the Australian Consumers’ Association.

The campaign, examining eight financial institutions Australia-wide, including banks, fund managers and a dealer group, has identified three target entities now undergoing further scrutiny, though ASIC is not yet naming any of the groups.

ASIC is focusing its inspection on the disclosure of preferential commissions for in-house advisers and how these commissions affect financial advice quality.

Preliminary findings have shown the quality of advice by these tied advisers is of a low standard as a result of commissions.

ASIC director of financial services regulation Sean Hughes says the regulator has encountered very poor record keeping among institutions being targeted, making it hard to find if they are complying with regulations.

Though advisers should be undertaking a full needs analysis when recommending products to consumers, Hughes says it is difficult to know if this is even taking place at all due to poor records. Hughes says a problem identified in all institutions examined was the standardisation of remuneration disclosure documents for all consumers.

He says the template-type documents were not tailored, easy to understand or even “particularly helpful” for consumers.

If blatant breaches are found, Hughes says ASIC will be undertaking further investigations leading to possible prosecutions.

He also says if the standards of behaviour are found to be low, additional policy guidance may be required for the industry.

The project is nearing completion, with ASIC expecting the campaign to be concluded by Easter and a report to be compiled before the end of the 2002/03 financial year.