Swindles that unscrupulous financial planners use
The introduction of new financial services regulations in March last year has not deterred some planners from acting outside the law.
Despite the law now being very clear on the role of financial advisers, the Government’s investments watchdog continues to catch out practitioners set on swindling you.
Earlier this year, 185 planners working for the big four banks and AMP were found to be "dishonest, illegal, deceptive and/or fraudulent" with customers.
The Australian Securities and Investments Commission (ASIC) reported in March that between 2009 and 2015, $30 million in compensation had been paid to 1347 customers who lost money because of non-compliant conduct by advisers.
And just last month, ASIC permanently banned a real estate spruiker who convinced clients to establish self-managed superannuation funds in order to buy property.
It is likely that ASIC will nab many more financial services practitioners dispensing poor advice as its large investigation of the sector, dubbed the Wealth Management Project, rolls out.
Among the more common ruses used by unscrupulous financial planners are:
- Encouraging clients to invest in illegal managed investment schemes
- Charging for financial advice that is not provided
- Advising customers to switch superannuation funds into branded product funds
- Misrepresenting how their fees are paid and instead drawing fees from clients’ funds.
ASIC takes the provision of illegal advice seriously and harshly punishes financial planners who act outside the law.
A few years ago, a Melbourne accountant was sentenced to five years’ jail for operating an illegally managed investment scheme involving property development. ASIC said the man had admitted to dishonestly using his position as a director and conducting an unlicensed financial services business.
One of the biggest cons ASIC has identified revolves around advisers billing for advice they have not given. Some reports suggest that the Big Four banks and AMP charged 200,000 customers $178 million in on-going fees for financial advice that was never delivered.
ASIC advises that “if you are paying ongoing advice fees, make sure you are getting the services you paid for”.
“If you have paid fees for services you haven't received, lodge a complaint through the bank or licensee's internal dispute resolution system as you may be entitled to a refund and compensation.”
The watchdog’s Moneysmart website has more information about the relationship you should have with your financial adviser.
Have you ever been taken for a ride by a financial planner? Have your gains been greater than your losses when following planning advice?
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