The Australian Securities & Investments Commission (Asic) has rescinded the licence of National Advice Solutions (NAS) as well as imposed a 10-year prohibition order against two of its directors.
The regulator found that NAS failed to ensure the financial services it provided, and that were covered under its licence, were offered efficiently, honestly and fairly.
More specifically, the company adopted a ‘layered advice’ strategy, where financial advice was separated into pre-determined topics, without taking into consideration the client’s individual circumstances, goals or needs.
Asic found the model “actively impeded” advisers from complying with financial services laws since clients were given “expensive and templated advice that was not appropriate for their personal circumstances”.
It explained that NAS would start by giving advice on superannuation, which would then lead to advice on insurance, even when the customer was already paying insurance premiums from their existing superannuation account.
The watchdog said that superannuation and insurance are so “intrinsically linked” that it was inappropriate to separate the financial advice in two.
NAS was also found to have failed to monitor and supervise its authorised appointed representatives and maintain competence to provide financial services as required by the company’s licence.
‘Defective’ and incomplete advice
As a result, the people in charge of supervision were banned for 10 years as well.
Gail Glasby and Paul Carcallas were members of NAS’ compliance committee and the responsible managers of the licence. Carcallas also performed an audit function.
But Asic found that they both had responsibility for the “systemic failings that arose from the use of the ‘layered advice strategy’”.
Carcallas also served a s a financial adviser at the company and, in a sample of advice provided obtained by the regulator, Asic found he did not act in his clients’ best interests, rather prioritised his own interests over those of the company or the clients.
More specifically, the advice provided was “defective”, the watchdog said, as it did not consider the relevant circumstances of the clients and contained projections that were not based on the recommendations provided and that failed to include all the costs associated with their implementation.
The omission of costs is believed to have been used to persuade clients to proceed with the advice, Asic added, and make them believe they had more funds available in retirement than what they could realistically expect.
Glasby, Carcallas and NAS have the right to appeal Asic’s decision via the Administrative Appeals Tribunal.
