# ASIC Damning Report on Financial Advisors Incompetence - 21/12/2012



## Garpal Gumnut (20 December 2012)

I have frequently spoken of my complete and utter disregard of Financial Advisors, a polity often composed of Wet behind the ears Youths, Ageing Insurance salesmen and Had-It ex minor Sporting stars, coaches and hangers-on.

To my surprise my good friend Sally Patten, with Leng Yeow has a report from ASIC in todays Australian Financial Review confirming my worst fears.



> SALLY PATTEN AND LENG YEOW
> AMP has been forced to improve the oversight of its financial planners after being given a second public rap across the knuckles from the securities regulator.
> 
> The Australian Securities and Investments Commission has also demanded that the country’s biggest wealth manager – which has an army of more than 3000 financial planners – amend its advice documents, set up a program of advice reviews and introduce a training program for both planners and theirs supervisors at AMP Horizons, a wholly owned advice subsidiary.
> ...




So most of these "Advisors" have less than one year's experience, give dodgy advice, do not understand the process and are unable to understand the clients' needs.



> In 2006, the regulator slapped it with an enforceable undertaking after it found the group failed to manage conflicts of interests in relation to the sale of in-house products.
> 
> *The regulator also found AMP’s authorised representatives did not properly disclose the costs of the products it recommended or the consequences of switching super funds.*
> 
> ...




ASIC is like a mad Aunt, she says nothing, we say nothing and every now and then she makes a bloody show of us all and her. This has happened with AMP.

ASIC found "the financial advice given did not necessarily leave clients in a better position." 

This bland statement means some poor fools LOST MONEY as a result of their Financial Advice, not due to bad weather, global or local reasons, but due to bad management and advice from their financial advisers.



> “While the majority of customer files assessed met or exceeded our expected advice standards, there were instances where the advice was not up to the standard we expect,” an AMP spokesperson said.
> 
> “Through the review it became clear that we needed to do more to support Horizon’s planners, who are new to the profession, to give clients the high-quality advice we expect. We’ve made a number of changes which centre on closing a gap in quality control between our para-planners who provide backend support and Horizon’s planners.”
> 
> ...




The paragraph above reads much like a script from Sir Humphrey Appleby, of Yes Minister fame. By the time all these "supports" are in place a whole new generation of workers and families will have been fleeced by the Financial Advice and Superannuation Industry.



> Before planners are employed by AMP Horizons, they undertake a 10-week intensive course and have nine months of professional training, often giving simple advice to clients under supervision.
> 
> It is understood that AMP Horizons will also employ more para-planners, who typically provide administrative support.
> 
> *Horizons Academy is a melting pot of fresh-faced graduates, ex-mortgage brokers, retired sports people and other people looking for a new career.*




This is totally inadequate preparation for Financial Advice given the complexity of Markets in 2012. 
The mix of "advisers" is the same.
They more resemble pimply youth from the Church of Jesus Christ of Latter Day Saints , Mormons, who call when one is in flagrente of an afternoon, or and that ARL Player one avoids in the Casino.



> *The only prerequisite for membership is PS 146, the minimum standard for entry into financial planning – a course that can be completed in days*.




This is the most damning of the comments in this excellent article from the Australian Financial Review. The answers to the questions for the course exam must be hawked around gyms free with the steroids.

To read the whole article , go to 

afr.com.au

*I have engaged Westpac to negotiate a free 1 month subscription to the AFR, for ASF members, particularly suited to those poor bastards who have used a Financial Adviser over the last 20 years, and probably cannot afford the sub.

go to http://afr.com.au* to get your password for a months free online AFR.

disclaimer

I hold stock in FXJ and WBC.

gg


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## gav (21 December 2012)

Thanks GG. I know of a close relative who will benefit from reading this.


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## Junior (21 December 2012)

AMP Horizons Academy is not representative of the industry as a whole.  That program is a disgrace, it targets salespeople with no regard for their technical knowledge, ethics and academic achievements.


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## PinguPingu (21 December 2012)

My Dad was with one of these guys.  Definitely lost a lot of money because of bad management with being given stock standard 'share packages' including company's like DJS and LEI....


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## MissInformed (22 December 2012)

PinguPingu said:


> My Dad was with one of these guys.  Definitely lost a lot of money because of bad management with being given stock standard 'share packages' including company's like DJS and LEI....




?!  Very few, if any, AMP advisers are authorised to give advice on specific direct shares, only shares in the context of a generic asset class. In short, they can advise you that it would be appropriate for you to hold shares in your investment portfolio but can't tell you which shares you should buy.  Certainly, direct shares are not on the APSL of AMP Horizons Financial Group. Are you sure your dad was advised by Horizons?  Another pointer to it not being Horizons is that the financial planning practice has only been running for a year or two and the market has been rising pretty steadily over that period.  You'd have to be pretty unlucky to lose money on shares in that period, particularly with a generic parcel of blue chips.

On another note, I'm an ex-AMPFP planner and I also went through the Horizons Academy and I can assure you that the days of all financial planners being clueless, commission driven insurance salesmen, ex-sporting identities and other repulsive creatures,  are long gone.   

Whilst RG146 is the minimum requirement to become a financial planner as stipulated by ASIC, it doesn't necessarily hold that employers would employ someone with that bare minimum qualification.  Why would they when there are so many better candidates available?  The new wave of financial planners are, like me,  more likely to be female and have at least an undergraduate degree and in most cases post-grad qualifications. Believe me, no one loathes 'old school' financial planners more than people like us.

Whilst I have no particular affection for AMPFP, I do have to defend them on one count.  There will always be some bad apples in the barrel and AMP's sheer size - it's as big as the #2 and 3# dealer groups put together - will mean that statistically many more of the bad apples will end up with AMP as a licensee.  Actually, when you look at the number of ASIC bans etc slapped on AMP  vs Commonwealth planners who have less than half the planner numbers of AMP,  AMP looks positively angelic by comparison.


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## tinhat (25 December 2012)

The hard working people at ASIC have written a report have they? How nice of them.


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## sydboy007 (9 January 2013)

I had the expensive lesson in my late 20s of just how self serving the financial industry is.  Probably 100K behind where I should be because of that.  I still get the odd urge to curse them.  We live and learn.

They all have the same methodology of how to build wealth ie DEBT and GEARING.

Being a high income earner with little debt  - now none - I would find it frustrating to speak to someone offering financial advise.  Right from the get go I would say if it involves debt I'm not interested.  It was like they were deaf.

These days I truly believe the best financial advisor is yourself.  Everyone else has a best interest, generally not yours.

I have signed up with a company last year that was the first I found who actually listened to me.  I don't actually use them for advise per se, but more as a sounding board.  It's quite handy to email my advisor with investments I'm considering and he will run them within the various groups at the firm.  I would say I have saved the fee already by being cautioned against 1 investment I was thinking about late last year.  It's also good to have to front up to someone once a quarter and show I'm keeping my savings plan on track.


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## Bort (15 May 2013)

I wouldn't let anyone else choose the house I was going to buy so why let someone you don't know buy shares for you. For this kind of thing to get any traction with the people who need it you'd need to run it on channel 9 news or a current affair which ain't going to happen.


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## DJG (15 May 2013)

Which PS-146 course can be completed in days? I'm going to need this eventually and aye, if it can be done on a weekend then sign me up! - Is it the old version of the now current RG-146 basically?


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## piggybank (9 October 2014)

The anticipated results from ASIC's investigation into life insurance advice is out, and it ain't pretty. The overall finding is that "the industry needs to improve the quality of advice and ensure that the interests of consumers are given priority" which sounds blander than the actual findings suggest.

Here are some choice excerpts from the media release:
ASIC’s review of more than 200 advice files from large, medium and small Australian financial services (AFS) licensees found... more than one third (37%) of the advice consumers received failed to comply with the laws relating to appropriate advice and prioritising the needs of the client. "This is an unacceptable level of failure, and the life insurance industry is now on notice to lift standards and professionalism" ASIC Deputy Chairman Peter Kell said.

High upfront commissions are more strongly correlated with non-compliant advice, including in situations where the recommendation is to switch products. the industry as a whole needs to consider how remuneration and compliance practices can better support good quality outcomes for consumers" Mr Kell said.


Read more: http://www.smh.com.au/business/mark...parks-rally-20141009-3hl0z.html#ixzz3FbEdzwR5


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## Hodgie (9 October 2014)

piggybank said:


> The anticipated results from ASIC's investigation into life insurance advice is out, and it ain't pretty. The overall finding is that "the industry needs to improve the quality of advice and ensure that the interests of consumers are given priority" which sounds blander than the actual findings suggest.
> 
> Here are some choice excerpts from the media release:
> ASIC’s review of more than 200 advice files from large, medium and small Australian financial services (AFS) licensees found... more than one third (37%) of the advice consumers received failed to comply with the laws relating to appropriate advice and prioritising the needs of the client. "This is an unacceptable level of failure, and the life insurance industry is now on notice to lift standards and professionalism" ASIC Deputy Chairman Peter Kell said.
> ...




The commissions structure of remuneration just gets abused sometimes, especially for insurance where the more cover you buy the higher premiums and commissions are. It's so easy to tap into someone's superannuation to front the premium costs, the monthly premiums may seem insignificant to a large super balance and it won't cause the client cash flow issues so it is well hidden. Many people don't notice the premiums coming out for years and when they realize how much they have paid it is horrifying.


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## Clifton (11 October 2014)

piggybank said:


> The anticipated results from ASIC's investigation into life insurance advice is out, and it ain't pretty. The overall finding is that "the industry needs to improve the quality of advice and ensure that the interests of consumers are given priority" which sounds blander than the actual findings suggest.
> 
> Here are some choice excerpts from the media release:
> ASIC’s review of more than 200 advice files from large, medium and small Australian financial services (AFS) licensees found... more than one third (37%) of the advice consumers received failed to comply with the laws relating to appropriate advice and prioritising the needs of the client. "This is an unacceptable level of failure, and the life insurance industry is now on notice to lift standards and professionalism" ASIC Deputy Chairman Peter Kell said.
> ...




Having been involved in the insurance industry in the UK for may years, this practice of of switching products, or churn and burn was a well known rort that was stamped out years ago, but it seems its still alive and well in Australia and allowed to continue


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