The following summaries provide further analysis of the key themes or conduct that was raised in public submissions received by the Commission.
Figure 7: Financial advice submissions: Key themes
Inappropriate financial advice
Over 250 submissions related to financial losses or poor performance of investments that had been made based on financial advice that was not appropriate in the circumstances. Issues raised included:
- financial advice given without any reasonable basis and which resulted in poor outcomes
- failure by financial advisers to consider appropriately a person’s financial or other personal circumstances when providing advice or structuring investments; and
- complex or high risk advice given to low-income earners, elderly people or people with a disability.
Excessive fees including fees for no service
The Commission received over 150 submissions where the key focus was unreasonably high fees for ongoing advice or management of investments.
Key themes raised in submissions about excessive fees, including fees for no service, mentioned:
- unreasonably high fees for ongoing advice or management of investments;
- fees being charged where no service was provided and consumers were unaware that fees were being charged at all;
- meeting with a financial adviser at the commencement or purchase of a new product, but never receiving any further statements, advice or contact from the adviser despite annual review charges; and
- consumers deciding they no longer needed financial advice and then being charged fees for exiting or rolling over into a new product.
Improper conduct by financial services entities was raised in over 130 submissions. Within these submissions, there were claims that:
- financial advisers had engaged in falsification of documents or fraudulent conduct;
- financial advisers had acted without the consumer’s authority in investing or handling money, or failed to act on clear instructions of the consumer;
- financial advisers being involved in using a consumer’s assets as part of fraudulent activity;
- financial advisers targeting vulnerable members of the community, including low-income individuals receiving government benefits, elderly individuals or couples, or people with a disability; and
- consumers being signed up to high-risk investments that they were unable to understand or afford.
Conflicts of interest
The Commission received over 110 submissions detailing conflicts of interest involving financial advisers as a concern. These submissions detailed:
- conflicts of interest arising between financial advisers and the manufacturers of investment products they sell;
- financial advisers failing to act in the best interests of the consumer due to conflicted remuneration practices or due to relationships between providers and manufacturers of investment products;
- consumers being sold investment products that performed poorly or did not meet their needs; and
- consumers being unaware of commissions being paid to financial advisers who are integrated with the manufacturer of the product.
Managed investment schemes
The Commission received over 70 submissions specifically referring to financial advice relating to managed investment schemes which later failed. These submissions raised concerns about the:
- lack of information or communication provided in advance, or before the scheme collapsed; and
- limited redress options for investors in failed managed investments schemes.
Submissions from current and former financial advisers
Over 50 submissions were received from current or former financial advisers about practices and behaviour within the sector. These submissions referred to:
- a culture within the financial advice industry that is focused on sales targets and products that deliver higher commissions, without consideration for the best interests of the consumer;
- financial advisers being encouraged to transition consumers to products that generate higher commissions;
- restrictions being placed on advisers to ensure that they only recommend products on an approved product list which is limited to in‑house or vertically integrated products; and
- financial advisers being forced to resign or being terminated if they refused to engage in certain practices.
General advice given by financial services entities
General advice given by financial services entities, as opposed to formal financial (or personal) advice, was the primary concern raised in over 120 submissions received. Of those, 80 related to mortgages and 40 to business loans. Key themes included:
- consumers suffering a loss following advice given by a person other than a licensed financial adviser or authorised representative (such as a bank manager or a broker);
- failure to explain properly the risks associated with certain products; and
- inadequate explanations given about the operation and costs associated with certain products.