Small pocket of failed measures can 'blow the entire business': Anderson

The Financial Advice Association Australia (FAAA) general manager of policy, advocacy and standards Phil Anderson warned licensees to improve their control measures for authorised representatives to avoid any unintended consequences.

Breaking down licensees' responsibilities when it comes to monitoring authorised representatives at the MDS Self Licensing Summit 2026 in Sydney yesterday, Anderson said many cases of misconduct stem from control measures inadequately enforced.

He provided InterPrac Financial Planning as an example, where misconduct of only a small portion of advisers can be a detriment for the entire business.

"There's a number of very good advisers at InterPrac but what this [the lack of control] does is it puts a spotlight on themselves. It has already been suggested that if you don't have the right controls in place... a small pocket in a business can blow the entire business," Anderson said.

To improve, Anderson said licensees must assess products before they had put them onto an approved product list (APL), stating that they can't just rely upon research houses, or products that were included on the investment menu of a super fund.

More rigorous processes need to be utilised during pre-vet and when dealing with lead generators, if any, as well, he added.

"You can't let your adviser choose the files that are going to be audited. You [the licensee] must choose. You got to have structure in this process," Anderson stressed.

"The licensee has to make sure that they are complying with these core obligations... Carefully assess each complaint and don't just respond with a template answer."

Further, Australian Financial Complaints Authority (AFCA) senior ombudsman Nick Battaerd added he's seen an authorised representative, who was also an adviser, selling non-existent products but it was the licensee who was penalised as an outcome.

"There's a little bit of a geographic separation, and [the authorised representative] started selling products that were, frankly, not existent... the failure to adequately monitor what he was doing was fundamental to the outcome of the case," Battaerd said.

"Even after [the licensee] became aware something wasn't right, and they were not going to keep his authorisation, the licensee was still held liable to his actions after that.

"Because they didn't tell any of his clients that they revoked his authorisation and they didn't put it up on a website or communicate to anyone dealing with him who's no longer an authorised representative.

"It's a licensee responsibility, in that case, he was acting outside of the authorisation, but the licensee should have been monitoring more closely."