Should AFSL boards be aware of client advice?
Boards of financial services companies offering financial planning may need to ensure they are aware of the day-to-day operations for giving advice to retail customers and planner compensation, according to financial services lawyer, Dr Hillary Ray.
Ray, a partner in Adelaide-based law firm Cowell Clarke, forecast the need for greater board awareness on the back of likely recommendations for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry which she believed would result in even greater powers being handed to the regulators.
“Companies that provide financial advice under an Australian Financial Services License (AFSL) must ensure this advice is appropriate and that they are providing financial services efficiently, honestly and fairly,” she said.
“This places responsibility on directors to ensure that management is carrying out and meeting best practice for all ongoing AFSL obligations which include monitoring and supervising their employees and representatives giving the advice to the client.”
Dr Ray said that boards operating in the financial services industry should take immediate steps to review their current processes for monitoring and oversight as well as clearly articulating the values of the organisation and behaviours expected of its employees and representatives.
“In some cases, these processes may need to be totally reconsidered to ensure that checks and balances are operating effectively, and that the board is being kept informed,” she said.
“This includes reporting to the board on all aspects of the financial services business day-to-day operations from giving advice to retail consumers, to reviewing compensation arrangements and disclosure documentation for clients. Ultimately, directors must be confident that they understand what is happening at customer level and that best practice is being maintained.”
Recommended for you
The Australian Financial Complaints Authority has reported an 18 per cent increase in investment and advice complaints received in the financial year 2025, rebounding from the previous year’s 26 per cent dip.
EY has broken down which uses of artificial intelligence are presenting the most benefits for wealth managers as well as whether it will impact employee headcounts.
Advice licensee Sequoia Financial Group has promoted Sophie Chen as an executive director, following her work on the firm’s Asia Pacific strategy.
The former licensee of Anthony Del Vecchio, a Melbourne adviser sentenced for a $4.5 million theft, has seen its AFSL cancelled by ASIC after a payment by the Compensation Scheme of Last Resort.
