The Australian Securities & Investments Commission claims to “contribute to the financial wellbeing of all Australians’’ by promoting “investor and consumer trust and confidence’’. Had it done the job taxpayers fund it to do, investors would not have been short-changed by banks, insurers, investment companies and ruthless financial planners. Investors who have entrusted their hard-earned savings to such institutions and professionals have been betrayed by them, and by ASIC’s negligence and incompetence.
Last week the banking, superannuation and financial services industry royal commission heard that AMP had misled ASIC over a fee-for-no-service scandal that breached the Corporations Act. Investor pressure on AMP chairwoman Catherine Brenner to resign is warranted, following the exit of Craig Meller as AMP chief executive. Shareholders, whose investments have melted down over the past fortnight, are entitled to be angry about bad management.
Clients misled by financial planners, who in turn have not been supervised by ASIC, also have grounds for anger. Last week ASIC senior executive Louise Macaulay, who is responsible for overseeing the discipline of financial advisers, admitted that ASIC took too long — about two years — to ban dodgy advisers, had never attempted to fine advisers for their misconduct and had only ever taken away one firm’s licence. Even a quasi-judicial officer, a member of the Fair Work Commission, Donna McKenna, had not been able to get in front of an ASIC officer to air serious concerns about dodgy financial-planning advice, she told the commission. When Ms McKenna visited ASIC’s Sydney office last year to complain about celebrity financial adviser Sam Henderson, she was told to fill in an online form and that there was a telephone down the corridor. Mr Henderson had advised Ms McKenna to roll her superannuation into an SMSF and borrow through it to invest in property. Such a move would have immediately resulted in her losing $500,000 as a penalty for early redemption. He tried to steer her into funds run by his firm, which he recommended to most clients.
Such problems have been long known. In December 2009, The Australian warned “the standards ASIC sets for financial planners are considered a joke in the industry’’. In 2014, we cautioned the Abbott government that cutting $120 million from ASIC’s budget, leading to a loss of 200 staff, was “a false economy’’ because “ASIC has only a few dozen of its 1780 staff overseeing financial advisers’’. The Turnbull government increased ASIC funding by $127m last year. But regardless of resources, ASIC has too often been part of the problem, not the solution. In a 2010 report, it claimed many consumers would benefit from better access to financial advice and “consumer mistrust of financial planners” could be cured by ASIC banning “bad apples from the advice industry”. How ironic. ASIC now acknowledges that when advisers tell clients to set up an SMSF, such advice is often not in clients’ interests.
In the post-royal commission shake-out, ASIC will be required to be more upfront and publicly active in its duties. Stronger penalties and an attitude that puts protecting the public at the centre of its operations are vital. Few would disagree with Liberal MP Sarah Henderson who said ASIC’s fining of insurer AAMI $45,000 for misleading advertising of its “complete replacement cover policy’’ was “like a whack on the wrist with a wet lettuce’’. The government has produced draft legislation to allow ASIC to prohibit toxic products and sales methods from the finance industry. That would be a start. And if the financial planning industry’s credibility is to be rebuilt, the Financial Planners Association, too, must muscle up against rogue planners.
30 Apirl 2018