FPA says banks exited advice and with it the cost of ASIC remediation oversight
The client remediation programs run by the major banks necessitated significant oversight by the Australian Securities and Investments Commission (ASIC) which has ultimately been funded by smaller financial planning licensees.
That is the assessment of the Financial Planning Association (FPA) which made clear in a submission that when the banks exited financial advice they also escaped the mechanism which would have seen them funding their share of the cost of ASIC’s remediation oversight.
But, at the same time, the FPA has recommended that when it comes to a Compensation Scheme of Last Resort (CSLR) licensees should be subject to a “graduated levy” based on “a risk-based approach where the larger the risk of consumers going uncompensated, the larger the levy”.
This will likely worry smaller licensees who some studies have identified as being less well-capitalised and less likely to pay Australian Financial Complaints Authority (AFCA) determinations that larger licensees.
The FPA has driven home the point by describing the ASIC levy funding mechanism as being not fit for purpose and pointing at that with the exit of the major banks, the financial planning profession has morphed from one dominated by six institutions employing 8,952 advisers to one now dominated by many mid-to-small licensees.
“The Regulator’s enforcement investigations for misconduct by these specific Australian financial services (AFS) licensees, and the licensee review and remediation programs of consumers affected by this misconduct, has been ongoing since the commencement of ASIC’s investigations of this matter 2015,” the FPA submission said.
“The compensation paid or offered by these six institutions since the inception of this program is $5.6billion (with an estimated $1.6billion left to pay) paid to seven million Australians.”
“The amount of compensation paid or offered, and the substantial number of consumers involved, indicates that there was a significant amount of ASIC surveillance and investigation activity and resources involved to provide effective regulatory oversight of these licensees’ ongoing remediation programs during the last financial year,” the submission said.
“The exodus by these licensees from the personal financial advice to retail clients on relevant financial products subsector has had a marked impact on the advice market and the levies paid by other licensees. This is because the ASIC levy is charged to licensees based on the number of financial advisers listed on the ASIC FAR as at 30 June 2022.”
“Given the significant withdrawal from the personal advice to retail clients by these six large licensees, they have not incurred a levy for this ASIC investigation and enforcement activity.”
The FPA said that a further concern with the proposed model is that the ASIC IFM categorisation does not align with AFCA member categorisation.
“This has long been a concern that the way AFCA bundles sub-sectors together does not match the way they are regulated by ASIC and makes it difficult analyse AFCA determinations for specific sub-sectors.,” the submission said. “The FPA recommends AFCA look to implement the same sector categorisations as ASIC going forwards.”
Big Banks are a disgusting cancer on Real Advisers that just keep attacking and causing pain, even when you hope they are gone.
Bruh, I, along with the majority of planners who will be left post 1/1/26 owe the banks big time for training / education. Are you going to train the kids coming out of uni?
Sure Mr Ramjet the Banks provided some training to newer advisers, I spent 6 mths at a bank too, as was advised that it would be good training. It was OK, not great but i already had a few years experience when I took the bank job.
Overall the damage the Banks have caused to Real Advisers is far greater than the benefits of training provided.
And yes we would be more than happy to training kids from uni, as have done multiple times in the past, currently doing with an OS Adviser now in Australia. But the the Govt needs to make the new training process less BS Reg heavy.
If you were trained by the banks you are more likely a salesperson driven by a target than an adviser driven by client best interest…
First time in 25 years I have agreed with the FPA!
I am in shock I think…………………………d
So the FPA want’s to blame the banks. What about it’s own role in the brouhaha. They did precious little and was given short shrift by both ASIC and the Royal Commission. Still struggling for relevance even after having its feet cut out from under it with it’s memebrs leaving. Were they bank advisers or self-licensed. The latter group who escaped scrutiny even though promised so by ASIC.
The cancer if it was real, is still there and will surge again catalyzed by a big market fall and n complaints that the pollies who bow to populist calls rush to please.