FSCP makes education order following advice error

A financial adviser, anonymised as Mr D, has received a written direction from the Financial Services and Credit Panel (FSCP) regarding advice related to a client’s concessional contribution cap.

According to the FSCP, the sitting panel found that the relevant provider failed to comply with s961B(1), s961G and s921E(3) of the Corporations Act 2001 when giving super contribution advice to a client.

“As a result of the advice, the client exceeded the concessional contribution cap by approximately $15,000,” the FSCP said.

“The breach occurred because the relevant provider failed to take into account the client’s defined benefit scheme even though income the client received from the scheme was referred to on several occasions in the statement of advice.”

Additionally, the sitting panel said that the adviser did not demonstrate the FASEA Code of Ethics’ Value of Diligence, and failed to comply with Standard 5, which includes the “requirement that all advice a relevant provider gives to a client must be in the best interests of the client and appropriate to the client’s circumstances”.

As a result of the findings, the FSCP sitting panel issued a written direction requiring the relevant provider to undertake “at least five hours of continuing professional education covering retirement planning in the next 12 months”.

“The education must be capable of being objectively verified by a competent source, not be provided by the relevant provider’s licensee, be in addition to the relevant provider’s existing continuing professional obligations, and must be approved by ASIC before it is undertaken,” it said.

In December last year, the FSCP provided a written direction to a relevant provider that gave advice in June 2023 recommending a client roll over $2 million from an untaxed state superannuation scheme, leading to a $201,365 tax bill.

“When giving the advice, the relevant provider failed to take into account or disclose that the $2 million exceeded the untaxed cap rollover limit of $1,650,000, that the client had also previously used a portion of this limit and that tax would be payable at a rate of 47 per cent on amounts exceeding the cap,” the FSCP said.

As a result, the adviser was required to have an independent person with expertise in financial services law audit, at his own cost, the next 10 pieces of advice.