Major advice licensee in possible best interest breach

Extra conditions have been placed on the AFSL of one of Australia's biggest financial advice licensees following an investigation sparked by phenomenal growth in adviser numbers in just six months.

SMSF Advisers Network has had additional licence conditions imposed after ASIC surveillance spurred concerns the licensee had inadequate supervision processes in place to ensure advice provided by its representatives was in the best interests of clients.

According to Rainmaker analysis of ASIC's Financial Adviser Register, SMSF Advisers Network has 1043 advisers on its books, as at April 2019.

The group was under surveillance by ASIC after the number of advisers calling the licensee home rose significantly in a short period of time.

In September 2017, 804 advisers were licensed by SMSF Advisers Network, according to Rainmaker. In the 12 months that followed, the number grew slightly to 824.

However, since September 2018, the licensee added a further 219 advisers.

Reviewing client files, the regulator became concerned that some of SMSF Adviser Network's advisers failed to demonstrate compliance with the best interest duty and related obligations.

The watchdog found Statement of Advice (SOA) documents used by the group contained heavily templated wording and many files lacked evidence to support adviser recommendations that clients establish a SMSF.

SMSF Advisers Network is now required to engage an independent expert to review and test the compliance of advice provided by its advisers.

The expert will also assess whether the licensee has appropriate supervision mechanisms in place to ensure its advisers are meeting the best interest duty and related obligations.

Where shortfalls are identified, the expert will make recommendations to address them.

The regulator said licensees are responsible for the conduct of representatives and ASIC expects licensees to have adequate supervision arrangements in place to ensure those representatives comply with the law when providing financial product advice to consumers.

"It is essential that AFS licensees' resources remain adequate, especially during periods of strong growth, to ensure compliance with their obligations. ASIC will continue to monitor movements in adviser numbers when targeting future surveillance work," ASIC said.

Further, when providing SMSF advice, advisers are required to adequately demonstrate why an SMSF is appropriate for the client and why it's in their best interests.

"ASIC expects financial advisers to use their skills, expertise and judgement in determining whether an SMSF is appropriate and not rely solely on client direction," ASIC said.

Rainmaker analysis shows the largest groups advisers left before joining SMSF Advisers Network are Count Financial, CPA Australia Advice and SMSF Advice.

Read more: ASICSMSF Advisers NetworkRainmakerSMSF AdviceCount FinancialCPA Australia AdviceFinancial Adviser Register
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