Call to remove 'bad apples' from the financial planning industry“
“Ten years on from when the regulator first called for the removal of bad apples from the financial planning industry, there's been not enough progress.”
John Collett, Sydney Morning Herald
Back in 2007, ASIC introduced a handbook outlining a framework for reference checks that employers should adopt. Despite repeated warnings about the need for rigorous recruitment processes, many firms have not effectively implemented these practices. This failure has allowed "bad apple" advisors to migrate between employers, posing ongoing risks to clients, particularly retirees who have suffered significant financial losses.
Recent legislative reforms aim to bolster consumer protection, however ASIC's recent review of major banks and AMP indicates problems in purging unscrupulous advisors from the industry. ASIC deputy chairman Peter Kell expressed frustration at the banks' failure to consistently conduct thorough reference checks, despite ASIC raising concerns a decade ago. He warned of potential public shaming for banks that do not improve their hiring practices.
ASIC's Financial Adviser Register, launched in 2015, provides transparency by listing advisers' names, registration numbers, licensing details, and employment histories for the past five years. It also notes disqualifications, bans, and enforceable undertakings. However, certain crucial details such as police checks and bankruptcy history are not included, and the register relies on self-reported information without official verification.
Despite the register's utility, the responsibility lies with financial planning licensees and their representatives to ensure they hire advisors of impeccable character from the outset. The temptation to quietly transfer problematic advisors persists, as firms may fear legal repercussions from giving negative references..
For more information, read John Colletts article from the Sydney Morning Herald here.
