Report 377 Review of advice on retail structured products reviewed five pieces of advice from each of 10 financial services licensees, and found “approximately half” of the 50 files lacked sufficient evidence that advisers had met their obligations to investigate their clients’ relevant circumstances.
The regulator also found that advisers were falling down when it came to the subject matter of the advice and provision of appropriate recommendations.
ASIC deputy chairman Peter Kell said the findings were “disappointing”, especially considering that the FOFA reforms “are now raising the bar for advisers”.
“Capital protected products are complex and can be difficult for investors to understand. Advice about them needs to be appropriate and accurate. Where it isn’t, we will take action,” said Mr Kell.
The warning to advisers comes after the regulator flagged a crackdown on product providers about the way capital-protected products are marketed to consumers in May 2013.
Speaking to InvestorDaily, Financial Planning Association (FPA) general manager, policy and conduct Dante De Gori said his organisation would be concerned if any financial planner was attempting to fit a client into a product.
Mr De Gori said the FPA would also be concerned if any advisers or clients were being lulled into a sense of security by the promise of ‘protection’ and entering into gearing arrangements.
But he was also concerned about the product designs themselves.
“ASIC have done a bit of work in this area and we’ve raised it in our Senate inquiry submission in respect to better product regulation,” he said.
But the FPA is also concerned about the relatively small sample size employed in Report 277, said Mr De Gori – adding that the FPA had similar reservations about Consultation Paper 216, which raised concerns about the advice delivered by SMSF advisers.
“Fifty pieces of advice does not represent the industry and does not represent the profession,” he said.
