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."
  • Sean on 13/12/2013 2:46:59 PM

    ASIC is far too publicity driven... The need to generate positive publicity to compensate for the flood of justifiably bad press and embarrassment ASIC inevitably endures following large collapses like Storm or Opes Prime, has resulted in the overzealous pursuit and merciless parading in the press of a few individual scalps who are often guilty of no more than technical breaches of the ever-increasingly confusing and client-unfriendly compliance regime dreamed up by politicians who are entirely unqualified to operate in the financial services sector. Phew!

  • Xavier on 12/12/2013 4:45:31 PM

    it is ridiculous. I have been in the industry for 32 years never had a complaint but the rogues have ruined it for every adviser. Agreed however that the compliance is way over the top and unworkable. Its the lawyers that have made it complicated. its over the clients heads and also for most advisers; including me. anyone want to buy a good business this adviser has had enough.

  • Alan on 11/12/2013 11:51:15 PM

    ASIC are a shambles and are out of control. Many out there would love to sue tham for incompetence. It is a disgraceful Big Brother approach and they are generating a climate of fear and intimidation for all advisers despite the usual few who may be doing the wrong thing by clients. It is simply pointless, pathetic and totally counter productive. I'm not sure about it taking even 10 years for 50% of advisers to "opt out", it will be lees than that. In 25 yers in this business I have never known it to be so bad, the perfect storm. The economy, the big banks, the big super funds, on line insurance and the big brother ASIC are hammering us. Time for us to stand up and fight or there will be no damn advisers left for ASIC to harrass.

  • Phil on 10/12/2013 10:34:12 AM

    I am a little confused. . . how is ASIC going to 'Chase the criminals' without reviewing if advisers are providing appropriate advice.

    I think the real issue with shadow shopping is that ASIC themselves don't even know what an 'appropriate' advise document should look.

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