Court finds advice group failed to supervise adviser conduct
The Federal Court has found that an advice group was responsible for not ensuring its former adviser provided appropriate advice to clients and acted in their best interests.
The Federal Court of Australia has ruled that RI Advice Group failed to take reasonable steps to ensure that its former financial adviser, John Doyle, provided appropriate advice to clients, acted in the clients’ best interests and put the clients’ interests ahead of his own.
Following an ASIC investigation, the company was found to not have had “adequate” processes in place to ensure if its advisers were avoiding quality checks or recommending non-approved products.
It comes after former adviser John Doyle breached his best interest obligations by giving inappropriate advice while working as a rep for RI Advice between May 2013 and June 2016.
“The court found RI Advice, an Australian financial services licensee, did not have any adequate processes to identify when advisers were avoiding advice quality checks or recommending non-approved financial products. The court said these were serious flaws which should have been apparent to RI Advice,” ASIC said.
“The court also found RI Advice failed in their obligations as a financial services licensee.”
The court had previously made declarations that Mr Doyle had breached his best interests obligations by giving inappropriate advice and failing to put his clients’ interests first. At the time, Mr Doyle was an authorised representative of RI Advice.
“Financial advice licensees need to understand that they can be liable if their advisers do not act in the best interests of their clients and do not prioritise their clients’ interests over their own,” ASIC deputy chair Sarah Court said.
“ASIC commenced this proceeding because of the harm caused to investors when advice is not appropriate. In some cases, Mr Doyle’s clients were retired or approaching retirement. Licensees need to have proper systems and processes in place to monitor the advice given by advisers to make sure consumers are protected.”
The penalty hearing for RI Advice and Mr Doyle has not been set. A case management hearing will be listed for a later date.
Mr Doyle was an authorised representative of RI Advice between May 2013 and June 2016 when RI Advice was owned by ANZ Banking Group. RI Advice is now owned by IOOF Holdings Ltd.
The conduct of both RI Advice and Mr Doyle was examined in a case study on “Bad Advice” as part of the financial services royal commission.
ASIC commenced proceedings against RI Advice and Mr Doyle in October 2019, seeking declarations of contravention, compliance orders and penalties.
ASIC said it will continue to pursue best interest duty-related matters to ensure customers receive appropriate, good-quality advice and their interests are put first.
The result today against RI Advice comes after previous outcomes against Financial Circle, AMP, Westpac and ongoing action against SMSF firm Dixon Advisory.