Adviser: How I survived a 3-year ASIC audit

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This financial adviser’s practice emerged better and stronger from a period of major personal and financial sacrifice.

Could you survive both financially and personally if you had to cope with a regulator audit for three years? This was the question posed by Edplan’s Phil Campbell as he told his story at the AFA National Conference.

The ordeal had “massive impact” on how his business – which specialises in giving financial advice to teachers – was run. But Campbell believes that the regulator’s scrutiny has seen his practice emerge stronger than before.

“As strange as it may seem, there are more positives to come out of it than negatives,” he said, adding that one of negatives that was really hard to handle was dealing with the ‘bad apple’ tag.  

“We got a call from ASIC in July 2005 stating that they were requesting documents and information regarding super switching advice we had provided to our teaching clients between December 2004 and July 2005. We were then involved in this audit up until September 2008,” explained Campbell.

“We had not disclosed the fees correctly in our SoAs,” he added. “We had overstated the fees, and you cannot claim ignorance just because it might have been a bit more difficult in those days to get the exact fee structure from websites and PDSs.”

“We had also not provided enough information in the SoAs in relation to the insurance benefits that were available in that fund, so a proper comparison could be done to be made with the insurance benefits being provided under the Navigator platform that we were recommending.”

Edplan therefore signed up to an enforceable undertaking with ASIC that would see the practice write to each of the affected clients to offer a comparison and the option to switch back to their industry super fund.

“We had to compensate them,” added Campbell. “That also meant giving back the fees we had deducted for our financial advice at the time.”

“There are times when you learn more from your mistakes than your triumphs. Whether we realised we had broken the rules or not, we had to get on with it and work through it.”

While Campbell stated that, at the time, the practice’s owners felt that they were being forced to make some major changes – including hiring a compliance manager – the improved systems and structures that were put in place actually benefited the business in the long run.

“We made a total overhaul of advisers and employees and changed the whole structure of how we delivered advice,” he said. “Now we realise that the business is in a much healthier state than it would otherwise have been.”

“If you get anything out of my message about the ASIC audit, it’s that if you get a knock on the door from ASIC, the first thing that you don’t do is have a nervous breakdown. Listen to what they have to say and, if they say that you’ve done something wrong, talk to them about how it can be solved. Get on with it.”

More stories:

Adviser: Why I left my practice

Adviser: Why I left my dealer group

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