In recent weeks the Australian Securities and Investments Commission (ASIC) has been particularly active in the prosecution of its duties in the financial services industry.
This was evident in that last week the watchdog banned or jailed three advisers and two stockbrokers and sought to close down a dealer group.
Of course it does not mean that ASIC had come across a rash of bad behaviour in the industry but rather that a series of ongoing investigations and actions all reached a conclusion at the same time.
Nonetheless these have been reported in the media and for all appearances ASIC is going through a busy time flexing its muscle.
However, this same media coverage can also supply the incorrect impression that the industry is troubled with advisers acting improperly or outside their licences, or without licences at all.
This impression is wrong and evident in last year’s total figures from ASIC for banned advisers, which stood at less than 30 out of an industry estimated to have around 15,000 planners and advisers.
While this represents a number well under one per cent of the total advisory industry, what these people have been banned for is no small matter.
Many have flagrantly breached ASIC guidelines and rules on the nature of what they can do as a licensed adviser, and in some instances have cost individual clients up to hundreds of thousands of dollars in either lost or poorly invested funds.
How is this possible then in an industry which constantly claims to be pushing for greater levels of education, awareness and professionalism?
Some of the reasons may stem from greediness and being in the time and place to act in such a manner, but on the whole every industry is always saddled with a small core of people whose actions tarnish the rest.
The upshot of all this means that those planners who sit in their practices and manage their clients’ affairs in a proper manner will have to work harder to promote the positive side of the industry.
This includes supplying education to clients about what is really an accepted and legitimate investment, as well as emphasising the industry on the whole is above board and hopefully beyond reproach.
A good part of this includes tackling issues such as soft dollar commissions and full disclosure of remuneration. This is something every planner and adviser must deal with, because they are part of every planner and adviser’s day-to-day business.
Soft dollar and disclosure of remuneration have been in the industry since it began and so are more accepted, but in any situation where they put the client at a disadvantage, they are no less acceptable than some of the dodgy practices ASIC is stopping.
If the industry wants to be truly beyond reproach it needs to tackle these areas as well. To not do so and yet to sit in judgement of the cowboys who get caught is hypocritical.
