Jeffery Lucy: An ever-vigilant regulator
THIS year, the Australian Securities and Investments Commission (ASIC) has left little room for doubt on just how serious it is about implementing and enforcing financial services reform.
During 2005, ASIC chair Jeffrey Lucy frequently warned financial services practitioners to play by the rules or face serious consequences — a threat the regulator has been far from shy about backing up.
Lucy trained the watchdog’s attention on misleading advertising, conflicts of interest, and Statements of Advice (SOA), particularly regarding super switching and self-managed super.
His comments in April set the scene for what would come: “ASIC expects that industry will act responsibly and we are actively policing the marketplace to identify, weed out, and deter any isolated bad practices we find that might be inappropriate.”
The second shadow shopping exercise, which coincided with the start of super choice, was one example of this “active policing”, demonstrating the regulator’s resolve in ensuring financial advisers abided by the letter of the law.
But the damning report issued as a result of the shadow shopping exercise won ASIC few friends in the planning industry, with many claiming the study’s scope was too narrow and its assessments too severe.
Notably, the exercise led to the prosecution of Hobart-based planner Brendan Moore, who the regulator doggedly pursued for failing to provide four SOAs, despite his clients experiencing no financial loss and maintaining their satisfaction with the service they had received.
This was a further blow to an industry already feeling victimised and weighed down by the burden of compliance.
Later in the year, ASIC was forced to defend itself saying it was not ‘out to get’ the advice industry or restructure it, preferring to work with it to help improve standards.
However, attempts at relief, such as its plan to compress the SOAs into a 12-page model, were met with scepticism.
Some commentators claimed the ‘model SOA’ left advisers more confused than ever. Some critics said it provided insufficient detail on insurance cover and client risk profiles, failed to explain the difference between ‘growth’ and ‘income’ assets, and gave inadequate explanations as to why one managed fund was chosen over another.
Others claimed the document’s three-page preoccupation with fees and charges was too detailed, and some raised concerns that the document did not provide advisers with enough protection against legal claims by clients.
In the end, many planners were simply reluctant to cut corners and risk attack from the vigilant watchdog.
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.
