PJC pushes for improved financial abuse training for advisers

Among its wide-ranging recommendations, the parliamentary joint committee (PJC) on corporations and financial services has included financial adviser education as an important step in combating financial abuse.

In its report, Financial abuse: an insidious form of domestic violence, PJC chair Senator Deborah O’Neill said the report represents “a moment of hope and potential change for our nation”.

“This report marks a crucial turning point in addressing financial abuse. Financial abuse is a tragically underacknowledged form of intimate partner and family violence that has often gone unseen or ignored,” O’Neill said.

“It has devastating effects on those it impacts. Financial abuse undermines the economic independence of the victim, often trapping them in cycles of financial hardship and dependency that can span decades, extending well beyond separation or divorce.”

According to Australian Bureau of Statistics figures quoted in the report, 27 per cent of women in Australia have experienced violence, emotional abuse, or economic abuse by a cohabiting partner.

Additionally, 16 per cent of these women have suffered from partner economic abuse, compared with 7.8 per cent of men.

“The scale of this issue is further highlighted by the fact that the financial toll on victims of financial abuse is estimated at $5.7 billion – almost $3 billion more than the total amount lost to scams in Australia in 2023,” O’Neill said.

Looking at financial advice specifically, the PJC recommended that “accounting bodies, financial advice and planning peak bodies, and victim-survivor advocate organisations co-design education resources for service providers to enable increased identification of financial abuse and timely reporting of suspected abuse to financial institutions and law enforcement bodies”.

According to the report, professionals such as financial advisers play a “crucial role” in identifying financial abuse, making sufficient training all the more important.

“The committee also identified that there are inadequate levels of ethical responsibility and professional training among financial planners, financial advisers, and accountants with respect to financial abuse,” it said.

“These professions play a crucial role as front-line service providers and often have a holistic and detailed knowledge of individuals’ financial situations beyond the knowledge of individual institutions, such as banks and insurance and superannuation providers.”

Along with improved training around financial abuse, the committee said there should be “explicit professional responsibilities” around not facilitating such abuse within intimate partner or family contexts.

This, it said, is necessary to “ensure greater protections for victim-survivors and particularly individuals with comparatively low levels of financial literacy”.

The report also recommended that accounting and financial advice industry bodies “develop and review ethical obligations of their profession in relation to receipt of instructions which may have a financial abuse motive”.

However, it added that the bodies also need to institute “accompanying penalties” for any member who “actively enable or facilitate financial abuse on behalf of their clients where there is no other reasonable basis underlying the instructions given by the client”.

In the Financial Advice Association Australia’s (FAAA) submission to the inquiry in June, chief executive Sarah Abood noted that “financial advisers are uniquely positioned to detect signs of financial abuse” given the close nature of adviser–client relationships and their thorough understanding of their assets.

“Despite this, research conducted by the FAAA alongside members shows that there is no clear method of reporting or assisting clients who are subject to financial abuse,” Abood said.

“Through clear guidance, training and support, financial advisers can help protect clients and other family members from financial abuse and support them in regaining financial independence.”

She also highlighted the complexity of financial abuse, noting that it can present in a multitude of ways, such as unauthorised transactions, coerced changes to wills or financial documents or exploitation of financial resources.

“Financial abuse is often challenging to identify, making it a difficult issue to address. Some victims may not even realise they are being abused, especially if the abuse is subtle or if it occurs within families,” Abood said.

The FAAA wants to do all in its power to “stop this serious and insidious form of domestic and family violence”, she said, and help protect “vulnerable Australians” who may be suffering from abuse.