Three SOA failures lead to latest FSCP decision
Actions on three different Statements of Advice (SOA) related to insurance and superannuation have led to a relevant provider being directed by the Financial Services and Credit Panel (FSCP) to receive specified supervision.
In the first SOA, the provider recommended that the client make a voluntary contribution to their superannuation fund to obtain a personal tax deduction when the fund did not allow voluntary contributions.
In the second SOA, the provider failed to consider the available insurance options in the clients’ super funds and failed to address the conflict between their retirement goals and financial protection goals. They also underestimated the costs of the insurance in the SOA’s retirement projections by $74,479 for one client and $14,566 for the other client.
In spite of the advice not being in the clients’ best interests or appropriate, the insurance recommendation earned an upfront commission of $20,000, and an ongoing commission of $6,700.
Finally, in the third SOA, the relevant provider was working with a married couple with a very low combined income and failed to ascertain the details of one of the clients’ superannuation funds, failing to consider the insurance options in both of their existing superannuation funds.
The relevant provider also failed to refer to the 50–75 per cent loading that would apply to the insurance recommendations for one of the clients in the SOA, and failed to address the effect this would have on their superannuation balance.
These actions meant the sitting panel found the relevant provider failed to comply with s921E(3) of the Corporations Act 2001 by failing to comply with the Financial Adviser Standards and Ethics Authority’s Code of Ethics, notably Standard 2 and the Value of Diligence.
As a result, the panel ordered that the relevant provider receive specified supervision from an independent compliance professional at their own cost at pre-vet the next 10 superannuation and next 10 insurance SOAs that they present to a retail client.
The relevant provider is then required to provide the independent compliance professional’s findings to ASIC.
Click here to read Money Management's summary of previous FSCP findings and which actions are occurring most.
AUTHOR
Laura Dew
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How could that underestimate happen?usually the quote transfer straight into the SOA, and what on earth has the commission got to do with it ( OFFENDED SOME PUBLIC SERVANT?) YEARS AGO
I offered 1mil of WOL to two client partners, their accountant vetoed it! They were killed in an aircraft landing accident two weeks later.Two wives and families left in A REAL MESS.The accountants ONLY comment was: you were going to make $20000.00 out of that. I forget the exact figure but if you can find a WOL RATE TWO MEN EARLY FORTIES comm WAS 120% FROM MEMORY,This was pre licensing. Today that accountantt would probably have get away with it as there was only a spoken word and the people spoken too were DEAD JG
This was pre licencing.