The corporate regulator released its fourth submission to the Senate inquiry into its performance yesterday.
The new submission follows on from ASIC's initial submission to the inquiry in August, which mounted a spirited defence of the way ASIC investigated and monitored CFPL from 2007 onwards – despite allegations aired by Fairfax that ASIC failed to act on whistleblower complaints in October 2008.
The new submission addresses “the wholesale change in the manner and culture in which financial advice is now provided by CFPL” and also provides an update on CFPL's compensation scheme.
PricewaterhouseCoopers (PwC) was engaged by ASIC as an independent expert to oversee the terms of the October 2011 EU, and released its final report on 26 November 2013, formally bringing the EU to a close.
According to the submission, PwC reported “major changes” to CFPL's management team.
“The senior management team previously directly responsible for CFPL is no longer with the business,” said the submission.
None of the staff involved in the 2008-2009 ASIC-imposed Continuous Improvement Compliance Program, which failed to address ASIC's concerns, remain within the business, said the submission.
CFPL has also launched a tailored risk management system called 'Connect', which will allow the firm to better monitor its advisers, according to ASIC.
The firm's remuneration framework has been redesigned for both salaried advisers and management staff, with the aim to incentivise improved behaviours by advisers and encourage monitoring by management, said the submission.
The PwC report also noted an improved culture within CFPL. Interviews with planners and management staff by PwC found:
“There has been a significant cultural shift in the business from a product sales focus to advice quality, with many interviewees commenting that ‘revenue league tables are never discussed anymore’.”
CFPL has also improved its monitoring and supervision, according to the submission, with the division of advisers into 'high need', 'medium need' and 'low need'.
The firm has also added 25 financial planning managers to the business, which means each manager is now responsible for 12-15 advisers instead of 25, said ASIC.
In addition, 80 hours of training is now devoted to each adviser, according to the submission.
ASIC has also negotiated a compensation scheme with CFPL, which aims to restore affected clients to the same position as if they had not received inappropriate advice.
The scheme has resulted in “CFPL paying out approximately $51 million in compensation to affected clients; and more than 1,100 clients accepting a compensation payment from CFPL”, according to ASIC.
