The corporate watchdog has warned that so-called "bad apple" financial advisers still work in the industry because major institutions have failed to properly check references before hiring them.
The Australian Securities and Investments Commission's review of how financial advice firms have dealt with poor-performing advisers says they sometimes sought references from unqualified sources and rarely received effective responses to requests for an adviser's previous audit reports.
Firms also occasionally failed to investigate highlighted instances of non-compliant conduct by advisers, ASIC has found.
ASIC's review, which focused on the conduct of the financial advice arms of AMP, ANZ, Commonwealth Bank, National Australia Bank and Westpac between January 2009 and June 2015, also found organisations had been too slow to report poor conduct to the watchdog.
'Failure or delay in notifying ASIC of suspected serious non-compliant conduct significantly affects our ability to take appropriate enforcement or other regulatory action," ASIC deputy chairman Peter Kell said in a statement.
"More importantly, it may also result in an increased risk of customer detriment as so-called 'bad apple' advisers continue to work in the industry."
ASIC pointed out, however, it had received more breach reports from institutions since highlighting their importance to licensees.
"We will not take formal enforcement or other regulatory action in relation to every breach report," ASIC said.
"This is because we have limited resources and must therefore prioritise taking action on matters that will address the most significant risks and have the greatest impact."
ASIC said about $30 million has been paid in compensation to 1,347 customers affected by non-compliant conduct by advisers during the period of the review.
That does not include the $178 million ASIC said in October it expects to be paid out for cases where institutions charged customers for advice they never received, nor the $23 million plus interest Commonwealth Bank has handed out under its Open Advice review program for victims of poor financial advice.
"ASIC acknowledges the work undertaken by the financial advice institutions to improve their practices ... however, there is further work to be done to assist in rebuilding consumer trust and confidence," Mr Kell said.
Share
