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Advisers' misconduct targeted

At a time when the Commonwealth Bank, along with other banks, insurers and fund managers, is fighting aspects of the government's proposals to reform the financial planning industry, Commonwealth Financial Planning has been forced to accept an "enforceable undertaking" from the Australian Securities and Investments Commission.

At a time when the Commonwealth Bank, along with other banks, insurers and fund managers, is fighting aspects of the government's proposals to reform the financial planning industry, Commonwealth Financial Planning has been forced to accept an "enforceable undertaking" from the Australian Securities and Investments Commission.

It follows an investigation by the regulator in the provision of advice by some of Commonwealth Financial Planning's financial advisers.

The Commonwealth Bank is part of the push to water down the government's proposed reforms to financial planning and to delay their implementation. The proposed reforms are in response to financial planning disasters, such as Storm Financial.

The Commonwealth Bank provided loans to many of Storm's clients. At the time, it apologised for shortcomings in its lending practices and paid some compensation to clients.

Among the proposed reforms, the banks and insurers do not like the "opt in" proposal, under which clients of advisers will have to agree, every two years, to continue to receive ongoing services from their financial planner.

Banks and insurers rely on the financial planners they employ and those that are aligned to them to keep the money flowing into their superannuation funds.

To resist reforms that will help protect consumers while being found wanting by the regulator under the current laws is not a good look for the Commonwealth Bank.

In a survey of clients of financial planners conducted by researcher CoreData last year, the Commonwealth Bank scored highest on trust but poorly on its ability to communicate with its clients. The bank's clients were also the least likely to recommend their financial planner to others. Of the four big banks and two insurers, AMP and AXA, covered in the survey, clients scored ANZ the highest for "overall satisfaction" with a score of 7.22 out of 10. AXA came second with a satisfaction level of 7.14. Commonwealth Bank had the lowest overall satisfaction level with a score of 5.24.

An enforceable undertaking is a legally enforceable contract in which the firm admits to no wrongdoing and promises to compensate any clients who have experienced losses and to do the right thing in the future.

ASIC has confirmed it is investigating "several" former Commonwealth Financial Planning advisers.

Under the enforceable undertaking, among other things, the bank must have a review that will "address whether there are adequate processes and controls in place to deal with ongoing risks of non-compliance; whether representative misconduct has been dealt with in a consistent manner; and if recurring themes have been appropriately identified". Also, the bank will have to "address data analysis processes and reporting capabilities allowing for early detection of advice process irregularities".

As is the nature of enforceable undertakings, the public will never know how many clients have been affected or how much has been lost due to planner misconduct.

Commonwealth Financial Planning has about 750 advisers and is one of several financial planning businesses within the Colonial First State wealth management business.

The general manager of advice for Colonial First State, Marianne Perkovic, says she considers the enforceable undertaking to be an opportunity to strengthen risk management.

She says the bank has already started implementing a program to improve consistency of advice and customer service.


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