Reference checking should not be limited to financial advisers, but also include any person who may have the ability to influence the advice process or who is in a management role related to advice, according to the Financial Planning Association (FPA).
The association made the comments as it provided ASIC with its submission in response to Consultation Paper (CP) 333, which considers reference checking and information sharing when hiring financial advisers.
FPA chief executive Dante De Gori said the body supported the intent of the paper, which requires licensees to share information about an adviser’s work history during a recruitment process, and had been a strong advocate of the reference-checking protocol with its own reference-checking service in place for more than 10 years.
De Gori said the reference-checking protocol should extend beyond those authorised to provide personal advice by a licensee and also include those who provide general advice, those who can influence advice, managers and directors.
“The FPA is still concerned that unprofessional and unethical participants in the financial planning profession can continue to influence detrimental consumer outcomes by being allowed to move into management roles without appropriate and mandatory reference checks being conducted,” he said.
“For this reason we continue to recommend that ASIC extend the law to directors, management and responsible managers, and not just advice providers.”
Pointing to its involvement with the central referee register model developed by the Australian Banking Association, the FPA also questioned why ASIC was not creating a central register as well.
“The proposed process is laborious because it requires the new licensee to manually search through multiple web pages as part of the reference-checking process. It’s an inefficient regulation of a critical consumer protection policy,” De Gori said.
The call for reference checking and information sharing was a recommendation of the financial services royal commission and CP 333 was formed in response to that recommendation, but a legal firm has claimed other recommendations have not been acted on with sufficient urgency.
Maurice Blackburn principal Kim Shaw said despite the final report of the commission being released two years ago, more than half of the recommendations had yet to be acted on in full or have been abandoned.
Shaw said that while COVID-19 has been cited by the government as the reason for the delay, it had abandoned recommendations to protect consumers against unfair or irresponsible lending, to ban commissions for mortgage brokers and to implement a compensation scheme of last resort (CSLR).
“The delay in implementing a CSLR is another key recommendation that must be acted on – commissioner Hayne’s report makes clear such a scheme is badly needed to compensate victims of negligent financial advisers who have gone bust, yet the federal government is still to introduce legislation to parliament for this,” she said.
“There remains no good reason not to act on this recommendation and we again call on the federal government to ensure that a CSLR is implemented this year as a priority.”
