ASIC has cancelled the Australian financial services (AFS) licence of ³Ô¹ÏÍøÕ¾ Advice Solutions Pty Ltd (³Ô¹ÏÍøÕ¾ Advice Solutions). In addition to this, ASIC has banned two Gold Coast-based responsible managers, Ms Gail Glasby and Mr Paul Carcallas from providing financial services for a period of 10 years.
Licensee failings
ASIC cancelled the AFS licence of ³Ô¹ÏÍøÕ¾ Advice Solutions because it failed to ensure that financial services covered by the licence were provided efficiently, honestly and fairly. ³Ô¹ÏÍøÕ¾ Advice Solutions adopted a ‘layered advice’ strategy whereby the licensee separated the advice into pre-determined topics, regardless of the client’s personal circumstances, goals or advice needs. The ‘layered advice’ strategy was found to actively impede financial advisers from complying with the financial services laws, as clients were provided with expensive and templated advice that was not appropriate for their personal circumstances.
Under the strategy, clients would generally receive advice about their superannuation first, which scoped out insurance even where the client was paying their insurance premiums from their existing superannuation account. ASIC found that in these circumstances, it was inappropriate to separate out the superannuation and insurance advice as the products are so intrinsically linked that advice regarding the two topics cannot appropriately be delivered in isolation.
Responsible Managers
ASIC found that ³Ô¹ÏÍøÕ¾ Advice Solutions also failed to adequately monitor and supervise its authorised representatives and maintain competence to provide the financial services covered by its licence.
Ms Glasby and Mr Carcallas were members of the Compliance Committee and the responsible managers of the AFS licence. Mr Carcallas also performed an audit function.
A responsible manager is expected to assess strategies and policies used within the business and ensure that they are consistent with the obligations of the licensee. ASIC found that Ms Glasby and Mr Carcallas bear part of the responsibility for the systemic failings that arose from the use of the ‘layered advice strategy’.
Advice failings
Mr Carcallas also provided financial advice to clients. In a sample of advice provided by Mr Carcallas, ASIC found he did not act in the best interests of clients, the advice was not appropriate, and he prioritised his interests (or that of the AFS Licensee) over the interests of the client.
As Mr Carcallas provided advice in accordance with the ‘layered advice’ strategy, the advice was templated, inappropriately scoped, and he failed to identify or consider the relevant circumstances of the clients when preparing the advice, including when recommending the client participate in an ongoing advice arrangement.
Further, ASIC found that the statements of advice provided by Mr Carcallas were defective, containing projections not based on recommendations provided and failed to include all costs associated with implementing the recommendations.
ASIC found that these projections were included to persuade the clients to proceed with the advice. The omission of these costs may have led clients to believe that they would have more funds available in retirement than they could realistically expect.
Background
The banning of Ms Glasby and Mr Carcallas and the cancellation of ³Ô¹ÏÍøÕ¾ Advice Solutions’ AFS licence are part of ASIC’s ongoing efforts to improve standards across the financial advice industry.
The banning of Ms Glasby and Mr Carcallas will be recorded on ASIC’s publicly available and the .
ASIC previously cancelled Smart Solutions Group (Aust) Pty Ltd’s licence for adopting a similar ‘layered advice’ strategy, where the process was found to be confusing for clients and, in some cases, resulted in lost insurance or policy exclusions (see ).
³Ô¹ÏÍøÕ¾ Advice Solutions’ licence cancellation was effective from 13 December 2022. ³Ô¹ÏÍøÕ¾ Advice Solutions had held AFS licence 514210 since 26 June 2019. Under the Corporations Act, ASIC has the power to suspend or cancel an AFS licence if a licensee does not comply with its obligations under s912A.
Ms Glasby, Mr Carcallas and ³Ô¹ÏÍøÕ¾ Advice Solutions have the right to seek a review of ASIC’s decision at the Administrative Appeals Tribunal.
