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BFCSA: Banks employed pen-pushing sellers with only 8 days training. ASIC say bad fiancial advice for years

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 Financial Planning Shock - Less training than a hairdresser


 Adele Ferguson, Ben Butler, Georgia Wilkins


16 August 2014

"If a person came into the salon and were given a hairdresser who only had eight days training at TAFE, I don't think they would be comfortable with that person doing their hair.": Emily Andrade, Esteem Hair and Beauty. Photo: Janie Barrett

More than half a million Australians may have received shoddy advice about what to do with their retirement nest eggs from financial planners, many of whom do less training than a hairdresser, it has emerged.  The crisis gripping Australia's financial advice sector deepened dramatically on Friday when the corporate regulator ordered one of the country's top financial institutions, Macquarie Group, to alert every customer it has ever provided with financial advice, while Finance Minister Mathias Cormann said he would look at toughening educational standards for financial advisers, which industry players say are far too low.

Macquarie must write to more than 160,000 current and former clients of its Macquarie Private Wealth division with an offer to participate in a compensation scheme.  This adds to 400,000 current and former customers of the Commonwealth Bank who have been invited to participate in a review program after potentially receiving bad advice.

The action by the corporate regulator follows a Fairfax Media investigation that revealed advisers at Macquarie cheated on continuous professional development exams, designed to keep them up to speed with regulatory and industry requirements, by copying answers from a document known as the Penske File.  Grave concerns about Macquarie's advice unit, Macquarie Private Wealth, were also raised in June by a senate inquiry that had been investigating allegations of serious misconduct at the CBA's Commonwealth Financial Planning and Financial Wisdom divisions.

Australian Securities and Investments Commission deputy chair Peter Kell, who has been leading the regulator's investigation into Macquarie, said the Penske File was "part of the work and the issues we're considering" under a deal Macquarie signed in 2013 to head off regulatory action.

Mr Kell said ASIC had been "raising the alarm bell" about shoddy advice for years.  "There needs to be a lot of work by the financial planning community to lift their game," he said.  He said he did not know how much the compensation scheme would cost Macquarie.

However, if just one in eight customers contacted by Macquarie accept an offer outlined in the letter of $5000 to pay for independent advice, this would cost the bank $100 million – before any compensation is paid.  In a media release, ASIC said there had been "changes" to Macquarie's management team, but Mr Kell would not say who, if anyone, had been sacked.  Macquarie executives went to ground on Friday, with none available for interview on the financial advice crisis and spokeswoman Lisa Jamieson refusing to answer 19 questions put to her on the issue by Fairfax Media. She said Macquarie noted ASIC's media release and "takes its regulatory obligations seriously".

Lawyers have already begun picking holes in Macquarie's proposed compensation scheme.  Slater & Gordon said it could take years to resolve, and John Berrill, head of Maurice Blackburn's financial disputes department, said it left the bank in charge of the process.   "The senate committee was scathing of Macquarie saying it had similar issues to Commonwealth Financial Planning. Lessons need to be learnt from that," he said.

Former financial planner Joel Ronchi, who now runs Melbourne financial training company Integrity Education Group, said cheating on continuing professional development exams was common in the advice industry.  "Even back then it [cheating] was pretty rife, planners getting their assistants to do it and that kind of thing," he said.  "That hasn't really changed."  No university degree is required to become a financial adviser. Education standards are currently set by an ASIC document, known as RG146, under which it is possible to become accredited as an adviser in as little as eight days..................


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