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Code breaches force retirement

An adviser has been forced out of the profession following two Code Standard breaches. She tells her story to ASSET as a ‘lesson’ to colleagues in the industry.

BY MATTHEW MARTIN

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

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 this year, the FADC released its decision, after a hearing was held in December 2020, to censure the woman for breaches of two Code Standards, also deciding to suppress her name.

Staff at both the Financial Markets Authority (FMA) and FADC spent a total of 1,684 hours on the case as well as spending $20,739 on the process.

The adviser spoke to ASSET saying she did not want her name suppressed and would have been happy for it to be revealed as most people in the industry knew who she was anyway.

“If I’d been used as a scapegoat and people could have learned from it that would have been okay. That would have made some sense. But it didn’t happen that way,” she says.

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, record in writing adequate information about a personalised service provided to a retail client

(b) demonstrate adequate knowledge of the relevant legislative obligations which result from the term “personalised service”.

The FADC said her breaches of the Code were less serious than most cases that had come before the committee and there “... is 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”.

“Record keeping is a fundamental duty of an adviser that underpins the supervisory regime established by the act and its importance cannot be minimised. It’s therefore important to sanction breaches where there are multiple instances of poor record-keeping,” said the committee in its decision.

“There is a need to reinforce professional standards and ensure the profession remains conscious of the significance of proper records.”

‘If I’d been used as a scapegoat and people could have learned from it that would have been okay. That would have made some sense’

unnamed adviser

The committee said the breaches of the two Code Standards came down to a misunderstanding of personalised service.

“Personalised service is a core concept in the act: it is a gateway to many of the act’s disclosure obligations (which, in turn, are central to the act’s scheme for informing and protecting the public).

“A fundamental failure to understand what it means (and therefore when the ensuing obligations are triggered) means some disciplinary action is warranted,” the decision stated.

But the adviser says right from the beginning she felt the process and investigation were rushed and at the time she had a lot going on in her life with the serious illnesses of both a close family member and a member of her staff.

She says no time extensions were offered by investigators, putting her under a lot more stress during a very 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 also wanted to exit the financial advice industry with her hard-earned qualifications intact, but that was not to be so. She did not apply for a transitional licence under the new regulations introduced on March 15.

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.

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

“This hurts. But I wasn’t going to let them tell me I had done wrong ... to defend yourself like this you need a lot of money.

“My mother did not want to know what happened in this case and she died before the result.”

She says some of her clients visited her after the decision was made bringing her flowers, food, coffee, kind words and encouragement.

Being older people, she says none of her clients wants to go to another adviser and have to build up a new relationship. They say they also don’t want to go into a bank that may end up selling them a product they don’t need for a price they can’t afford.

“I’m not a product pusher and never have been, it’s not about clipping the client’s tickets. I have been giving advice and life coaching for a long time and all I can do now is console them – I’ll have to retire at some stage, but I didn’t want to go out like this.”

The now former financial adviser says she admits in hindsight her recordkeeping 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.

“The financial services legislation is all about the sale, discharge or retention of financial products. It’s regulating the sale of products.

“I think they [the FMA] presume that all service is about selling a product, an adviser raping and pillaging their clients for their own financial gain, but for me, it’s never been like that – that’s never been my motivation.

“I’m astounded by the bureaucracy and lack of comprehension of what a good holistic financial planner was doing.

“It appears to me the FMA has developed a compliance model in tune with some compliance specialists.”

According to an Official Information Act request made by ASSET, staff at both the FMA and FADC spent a total of 1,684 hours – around 210 working days – on the case.

Costs for both organisations totalled $20,739. This was made up of travelrelated 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 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 account 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.” A