A subsidiary of the Findex Group will enter into an enforceable undertaking (EU) after ASIC surveillance found a number failures regarding client advice files, policies and procedures.
ASIC has accepted an enforceable undertaking from a subsidiary of the Findex Group after it was found the firm was transferring clients to more expensive products for no reason.
In a statement today, ASIC announced the enforceable undertaking of Financial Index Australia Pty Ltd (FIA), part of Findex Group Limited.
The EU comes after ASIC found FIA had moved clients from their existing product into a more expensive FIA branded product, without sufficient explanation or justification.
The EU was offered following surveillance by ASIC, which looked at a number of FIA's policies, procedures and client advice files.
Through its surveillance, ASIC identified a number of concerns in relation to FIA's financial advice business, including out-of-date policies and procedures, deficiencies in the file audit process, and insufficient information being provided to clients who were being moved into new products.
The surveillance conducted by ASIC found that a number of FIA's policies and procedures were deficient and referred to old sections of the Corporations Act 2001.
Further, FIA's Adviser Incentive Scheme was likely to encourage representatives to switch clients from existing third party products to FIA's own branded product.
Meanwhile, the majority of clients whose files were reviewed by ASIC were moved from their existing third party product to a more expensive FIA branded product without adequate justification or explanation as to why the move was likely to leave the client in a better position.
ASIC said that in the majority of cases where clients were recommended to switch from their existing third party product to a FIA branded product, the SOAs provided to clients did not include the additional information required when an adviser recommends replacing one product with another.
For those clients who were recommended to switch, there was a lack of detailed inquiries into the client's personal circumstances, financial needs and objectives, ASIC said.
Last year, Findex and FIA were penalised for using the terms ‘independent’ and ‘non-aligned’ on websites. Findex responded to the penalty claiming it was not the group's intention to mislead clients.
Update: A spokesperson for Financial Index Australia said the concerns outlined in the EU are confined to a "small portion of our client base" and are "not the result of any client complaints".
"At no stage have there been any concerns about the security of client funds, or the way they have been invested or supervised. ASIC’s concerns predominately relate to the fullness of the advice documentation process," said the spokesperson.
"Clients accepted full disclosure on fees and, as is always the case, our recommendations were supported by thorough research provided by external leading industry professionals with the aim of delivering quality outcomes for our clients; they are not dictated by price.
"The performance of the funds has generally been consistently above benchmark over the entire period that the recommendations were made.
"It is unfortunate that ASIC's notice period referred to in the EU did not take into account updated versions of FIA's policies and procedures.
"ASIC acknowledges in the EU that FIA had already implemented a number of its own initiatives to address most, if not all the deficiencies, prior to entering into the EU.
"Our clients can be assured that their interests are FIA’s highest priority and if they have not already been contacted by us, then they are not impacted by the EU."
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