ASIC's shadow shopping 'bordering on fraudulant'

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A senior financial adviser has complained to the government about ASIC’s controversial shadow shopping practices, labelling it unethical and causing advisers to leave the profession in droves.

Rynco director Peter Corrie wrote to Senator Arthur Sinodinos, saying ASIC’s shadow shopping practices are coercive, devious and invasive acts which border on fraudulence.

He estimates 50% of advisers will have left the industry in 10 years’ time unless something is done to “stop these threatening and insidious practices”.

Corrie told Wealth Professional ASIC’s actions are “just not cricket”.

The contentious behaviour includes ASIC staff or members of the public posing as prospective clients to get advisers to put together advice, to check compliance. According to Corrie, ASIC has also recently been going to life insurance companies, getting relevant information about a client’s policy and then contacting the client to find out what advice they had been given.

Corrie said practices such as these are “killing the golden goose” and have “ruined” the career of a good friend of his recently. His friend was one of the owners of AAA Financial Intelligence, which had its license cancelled by ASIC early this year.

The Sydney-based company provided financial planning advice via a network of 186 authorised representatives and adopted a business model that allowed it to increase its cash flow by increasing the number of advisers it authorised.

According to ASIC and the Administrative Appeals Tribunal, the business failed to identify who its representatives were and that they were properly qualified.

But the friend – who Corrie did not want Wealth Professional to name to avoid further recrimination, as he is currently working as a financial adviser after having his licence reconferred – told him ASIC’s behaviour bordered on aggressive harassment. The business was a “scapegoat” for others, Corrie said.
 
“Chase the criminals by all means but don’t get everyone else involved. At the moment, ASIC’s conducting a witch hunt,” said Corrie. “There are a few criminals out there, but no more than any other profession. The admonishment is over the top.”

Corrie puts the surveillance down to ASIC “overreacting” to rogue operators, rather than any great drive to help the industry become professional.

“We have always been professional. I wouldn’t have survived 40 years in this industry if I wasn’t professional… I suppose it’s because we’re an easy target.”

Corrie, who has also worked 10 years in financial management, thinks ASIC’s overregulation is driving advisers away from the industry. While he will retire in a few years, he wants to speak out for the sake of younger advisers.

So what’s the best outcome? “Get ASIC to back off and get away from people who are trying to do the best job by clients, the country and the economy.”

He is not getting his hopes up about ASIC changing its practices, but hopes the senator listens to his concerns.

“I’m not trying to be a crusader. I’m just trying to stand up for our rights. Because our rights as advisers are definitely being eroded.”

But ASIC will not stop shadow shopping any time soon.

"Shadow shopping is one of the ways ASIC investigates the quality of advice provided by financial advisers," a spokesperson said.

"This work is vital in ensuring Australian consumers obtain quality financial advice."