ASIC said in a statement that it had issued Queensland-based financial adviser Timothy Shapter a seven-year ban after reviewing his reports.
The regulator also cancelled the Australian Financial Services (AFS) licence of Smart Solutions Group, of which Mr Shapter was a director and an authorised representative.
The review found that Mr Shapter provided inappropriate switching advice by recommending that clients switch out of their existing superannuation and insurance products, and into higher fee-paying products.
Mr Shapter also used a “layered advice” strategy, whereby he provided his clients with a superannuation statement of advice first, followed by an insurance statement of advice a few weeks later. This process was found to be confusing for clients and, in some cases, resulted in lost insurance or policy exclusions, while generating fees for himself.
According to ASIC, Mr Shapter obtained most of his clients under a referral arrangement with a third party engaged by Smart Solutions.
The third party reportedly cold-called potential clients and obtained limited details about their financial circumstances and their risk profiles, which Mr Shapter then used to prepare his advice documents. He usually issued his superannuation statements of advice on the same day that the initial client inquiries were made by the third party.
ASIC explained that Mr Shapter could not have properly inquired about, or considered, his clients’ needs and circumstances, their reasons for wanting advice, or the most suitable options for their circumstances within such a short time frame.
“Financial advisers have a legal obligation to act in the best interests of their clients when providing personal advice. This includes taking reasonable steps to understand their clients’ personal circumstances and exploring existing financial products to ensure they are providing appropriate advice that meets their clients’ objectives,” ASIC said.
The regulator noted that it cancelled the AFS licence of Smart Solutions because the licensee failed to, among other things, ensure that financial services were provided efficiently, honestly and fairly.
“AFS licensees must ensure that they have adequate resources and arrangements for monitoring and supervising their representatives. Individual advisers cannot audit their own advice.”
The banning of Mr Shapter and the cancellation of Smart Solutions’ AFS licence are part of ASIC’s ongoing efforts to improve standards across the financial services industry.