FSCP orders adviser to undertake independent supervision

Actions on three different statements of advice (SOA) related to insurance and superannuation have led to a relevant provider, anonymised as “Mr F”, being directed by the Financial Services and Credit Panel (FSCP) to receive specified supervision.

In the first SOA, the provider recommended the client make a voluntary contribution to their superannuation fund to obtain a personal tax deduction when the fund did not allow voluntary contributions.

In the second SOA, the provider failed to consider the available insurance options in the clients’ super funds and failed to address the conflict between their retirement goals and financial protection goals. They also underestimated the costs of the insurance in the SOA’s retirement projections by $74,479 for one client and $14,566 for the other client.

In spite of the advice not being in the clients’ best interests or appropriate, the insurance recommendation earned an upfront commission of $20,000 and an ongoing commission of $6,700.

Finally, in the third SOA, the relevant provider was working with a married couple with a very low combined income and failed to ascertain the details of one of the client’s superannuation funds and failed to consider the insurance options in both of their existing superannuation funds.

The relevant provider also failed to refer to the 50–75 per cent loading that would apply to the insurance recommendations for one of the clients in the SOA, and failed to address the effect this would have on their superannuation balance.

These actions meant the sitting panel found the relevant provider failed to comply with s921E(3) of the Corporations Act 2001 by failing to comply with the FASEA Code of Ethics, notably Standard 2 and the Value of Diligence.

As a result, the panel ordered that the relevant provider receive specified supervision from an independent compliance professional at their own cost and pre-vet the next 10 superannuation and next 10 insurance SOAs that they present to a retail client.

The relevant provider is then required to provide the independent compliance professional’s findings to the Australian Securities and Investments Commission.