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Ending a 40-year career - the true cost of a FADC decision

The long-serving financial adviser recently censured by the Financial Advisers Disciplinary Tribunal says she wants to tell her story after the process left her frustrated, disappointed and ultimately forced her out of the profession.

Tuesday, July 13th 2021, 6:33AM 10 Comments

by Matthew Martin

The woman, who cannot be named due to a suppression order, says her experience with the tribunal should be seen as a lesson to other advisers who may get too comfortable with long-term clients.

In March, the Financial Advisers Disciplinary Tribunal (FADC) released its decision to censure the woman for breaches of two Code Standards, also deciding to suppress her name.

According to an Official Information Act request made by ASSET Magazine and Good Returns, staff at both the Financial Markets Authority (FMA) and FADC spent a total of 1684 hours - about 210 working days - on the case.

Costs for both organisations totalled $20,739 (incl GST) and was made up of travel-related costs, transcription fees, courier costs and payments to committee members.

The FMA and FADC do not charge hourly rates for in-house staff costs.

In its decision, the FADC stated it had found the adviser had breached Code Standards 12 and 15 of the Code of Professional Conduct for Authorised Financial Advisers and she had failed to;

(a) In the case of three clients, to record in writing adequate information about a personalised service provided to a retail client.
(b) To demonstrate adequate knowledge of the relevant legislative obligations which result from the term "personalised service".

The FADC said her Code breaches were less serious than most and there " no suggestion that the Respondent has improperly benefited at the expense of her clients, or that any client has been disadvantaged."

Up until the decision, the adviser had never been censured in her almost 40-year career, but the FADC said the breaches were "not to be treated lightly".

"There is a need to reinforce professional standards and ensure the profession remains conscious of the significance of proper records," says the committee in its decision.

But the adviser says she felt the process and investigation were rushed and no time extensions were offered by investigators, putting her under more stress during a difficult time.

"Being near to retirement anyway, I had not taken on any new clients for about five years. It always felt like they wanted to make an example of me, but I was determined they would not do that so I took it all the way expecting I would be able to tell my story.

"In the end, it was the last straw. I decided not to go through the process to renew my licences, mainly because I was exiting [the industry] anyway."

She did not apply for a transitional license under the new regulations introduced on March 15.

"The whole process left a bad taste in my mouth - my integrity was being questioned and it has been tarnished.

"I'm not a product pusher and never have been, it's not about clipping the client's tickets."

The now-former financial adviser says she admits in hindsight her record-keeping may not have been as good as it should have been - as highlighted in the FADC decision.

"As a financial planner who has worked for the ongoing wellbeing of my clients, I would admit that my record-keeping was insufficient, as my relationships with those clients were 30 to 40 years in duration.

"The familiarity I had with my clients was my undoing, but each and all of them were well served.

"I could have done better, my comfort levels with my clients was probably my downfall, they [advice notes] were probably too rough, they were not prepared for an audit."

She still feels that her processes were in line with legislation and while she did have her day in court feels she has been misunderstood.

In a statement from the FMA regarding whether it considered the time and money spent on the case was worthwhile, its chief executive Rob Everett responded with the following;

"The FMA has a rigorous decision making and governance process around its enforcement activities, including those cases that are brought before the Financial Adviser Disciplinary Committee.

We focus on areas of compliance and conduct that;

- are likely to cause risk and harm to broader confidence in the markets
- hold participants to accounts for failing to meet their obligations
- send a strong deterrence signal to all market participants on the consequences for failing to comply with obligations
- maintain public confidence that the law is being upheld

There is always a public interest test to ensure that we are deploying our resources appropriately," Everett says.

A long-form version of this article was published in this month's ASSET Magazine.

Tags: ASSET Magazine FADC Financial advice Financial Markets Conduct Act FMA

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Comments from our readers

On 13 July 2021 at 8:18 am LNF said:
"send a strong deterrence signal to all market participants"
Says it all
On 13 July 2021 at 9:44 am w k said:
so the regulation is all about administration.
40 years in the career with zero complaints (i assume happy clients), got penalised because of poor admin.= minus one adviser in the market. and dodgy advisers with excellent paper work got to live another day.
how does that translate to "better customer outcome"? and what's the definition of "better customer outcome", please.
On 13 July 2021 at 1:19 pm Murray Weatherston said:
I think FMA charges licensing work at $178.25 per hour (incl GST).
Using that pricing, the 1684 hours FMA spent on this case would be just over $300K. Add the $20K direct expenses and we get over $320K.
All this for 2 Code breaches that the FADC said were "less serious than most".
Who would try and guess how much the adviser spent on her own defence?
My guess for what its worth is the total resource cost (both sides) would well exceed $500K.
For what good?
I doubt there are many clients who would give a rats' as to how big their adviser's file on them was.
The only people who are likely interested in the size of the records are the compliance industry and the regulator.
Ah it's liberating to be free from those costly shackles.
On 13 July 2021 at 6:02 pm Amused said:
“send a strong deterrence signal to all market participants on the consequences for failing to comply with obligations”

Really? So I take it that the FMA is about to now get off its backside and actually start enforcing adviser websites not being updated to reflect the new disclosure rules required from 15th March? You can’t hound a veteran adviser of almost 40 years out of the industry for poor admin but then allow other advisers who are thumbing their nose at their disclosure obligations to continue operating! That sends very mixed messages to the adviser community and the industry as a whole.

John FMA director of market engagement John Botica was quoted on Good Returns on the 20th April saying – “But it would be remiss of me to say that when we come across websites that blatantly have not been updated, or are still referring to old terminology, you will see us being far less sympathetic to those sorts of issues. We will be taking action”

Well we are now coming up on 120 days Mr Botica since the new disclosure rules came into force by law and yet there are still scores of adviser websites who are not compliant.

What a farce.
On 14 July 2021 at 7:23 am Dirty Harry is back said:
Strong deterrent alright.
- those who remain in the industry
- those who aspire to join it

I saw a story in the paper about a guy whose attempt to remove a wasp nest with fire resulted in him unintentionally burning down his house. Strangely I recall that article right now.
On 14 July 2021 at 2:39 pm Dirty Harry is back said:
My congrats to the brave Men and Women of the FMA for successfully prosecuting and denouncing the least egregious of crimes. We all know that low-level record-keeping misdemeanors are a gateway crime that leads to so many advisers going on to become fraudsters and charlatans ruining the lives of the many clients who continue to endorse their good work.

It may never be known just how far this un-named adviser never was from becoming the next big ponzi scheme mastermind.
Must be time for another visit to the Crowne Plaza for a decent knees-up.

This is just the latest in a decade of FADC enforcement that has yielded a few such cases.

We should be grateful to see the prevention of harm that would not have been caused, and the restoration of consumer trust that had not been lost.

Your clipboard-carrying peers in bureaucracy will no doubt look upon this latest work as a masterclass in job creation. I have no doubt that as you look at the ASIC example of successfully dividing an ever-increasing funding requirement among an ever-decreasing number of advisers, and wondering how you could ever manage the same here, that this case will give you hope that there will always be more you could do.
On 16 July 2021 at 4:22 am Tony Vidler said:
My biggest question on this matter is "why is there a suppression order?"

Clearly the adviser does not wish to have the details suppressed, so who does? The only possible answer is "the FADC".

So why? Why does the disciplinary body not wish to have its workings and thinking made publicly available for the benefit of educating the rest of the advisory sector when the adviser at the centre of the case is quite comfortable with that.

In the words of J.B. Morton: "Justice must not only be seen to be done, but has to be seen to be believed".

Visibility of process is everything when it comes to obtaining public support for the process leading to such decisions.
On 16 July 2021 at 5:21 pm OmokGuy said:
"send a strong deterrence signal to all market participants" - yes it certainly does add significant weight to the question I'm seriously pondering of whether to exit a 34-year career now pre-60, just to be free of these clowns! I' for one, have had a gutsful!
On 17 July 2021 at 8:39 pm w k said:
did you guys read the part that says "As far as she is aware, she says investigators did not speak to her clients who also wanted to know if they could lodge a complaint against the FMA and tell them they were wrong to pursue her."
this must be the highest degree of a "good customer outcome", that your clients back you all the way.
your thoughts?
On 25 August 2021 at 3:20 pm Murray Weatherston said:
The AFA got off really lightly cf with what has just happened in Australia.
Westpac/BT just got pinged in Australia for $10.5 million for 14 cases of providing personalised advice under the guise of a general advice licence!
And all Australian advisers will be levied the costs of ASIC taking the court case. Many advisers are spewing bricks.

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