Rampant conflicts of interest
In 78 per cent of the advice examples, the adviser was remunerated through product commissions or fees based on a percentage of the client's assets or investments under advice.
Pro forma advice
Irrelevant statements of advice (SOA) and generic templates showed the cut-and-paste advice that often led to a financial product recommendation. In one SOA, the consequences of replacing a particular investment product - which the client did not hold - had been copied and pasted from someone else's SOA.
Documentation
While one SOA explained how paying lower super fees could lead to a higher retirement balance and help the clients achieve their goals, it also showed the advice would leave the clients tens of thousands of dollars worse off. The new product had fewer features and cost more (including a tenfold increase in annual product fees).
Remuneration structures
One disclosure document said that, in line with industry moves to fee-for-service remuneration, the business was "moving away from trailing commissions in favour of 'adviser service fees'". However, "the adviser service fee will remain the same as the previous trailing commission". ASIC noted the only change was the name - from 'trail commission' to percentage-based 'adviser service fee', with both automatically deducted from the client's superannuation fund balance each year.
Replacement products
Super was switched into inappropriate or more expensive products - almost 75 per cent were switched to in-house products or those paying commissions or fees to the adviser. Of the 13 advisers from one of the big four banks (or their financial planning divisions), 11 delivered an in-house product recommendation (that equates to 85 per cent). ASIC's comment on this is worth quoting: "This aligns with wider industry research that finds the recommendation of in-house products is endemic in financial and superannuation advice."
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