The shutdown of Dover Financial — which the Australian Securities and Investments Commission (ASIC) would eventually have done but was pre-empted by managing director Terry McMaster (he of the collapse in the witness box at the royal commission) — has been a long time coming.
McMaster was being questioned about Dover’s “Orwellian” client protection policy, which was actually about protecting Dover Financial by cutting adrift any advisers who failed to research products properly, when he collapsed at the royal commission. But he’d also come under fire for threatening complainants with defamation suits and Dover’s willingness to take on financial advisers who had previously engaged in misconduct with other licensees.
On that score, the matters before the royal commission were hardly new. Back in 2009, McMaster defended hiring planners involved with the Storm Financial collapse. “As long as they don’t breach the Corporations Law, they can stay reps. That’s the way our model works,” McMaster declared about planners who were later banned even by the watchpoodle ASIC. It came as no surprise that years later, Dover happily employed one Adam Palmer, who had left AMP after being audited and found, not for the first time, to have provided poor or conflicted advice.
What ASIC was doing in the intervening years about the apparently endless recycling of poor financial planners around the industry is anyone’s guess. Evidently not a lot between 2019 and 2017.
Such is the bizarre structure of the financial planning industry that the closure of McMaster’s firm has left several hundred financial advisers unlicensed and unable to operate until they can move to another licensee. Imagine a hospital shutting down, leaving all the doctors unable to work and uninsured. The sooner the industry actually gets serious and embraces full professionalisation and individual licensing and professional indemnity insurance, the sooner it will start losing its reputation as a haven of shonks and spivs.
The only serious regulatory alternative currently around is regulation by “too big to fail” — somehow ensuring the big banks and AMP remain vertically integrated (and thus conflicted) in the financial advice and wealth management businesses, meaning big players with deep and very sue-able pockets will be responsible for providing much of the financial advice given to Australians. Most of the big banks themselves have worked out that the reputational damage of this approach is too great and are bailing out. There’s no easy fix, especially when ASIC lacks the capacity or willingness to aggressively protect consumers.
“Imagine a hospital shutting down, leaving all the doctors unable to work and uninsured.”
Your example isn’t great. Yes, some doctors are consultants who are self-employed, obtain their own insurance, and can work at any hospital which will accredit them as well as having their own practice in their own consulting rooms if they wish, but many are employees of the hospital and would be in quite the invidious position if a hospital suddenly closed down (unlikely as it is to happen).
The idea of financial advisers being licensed through a firm is that the firm is MEANT to be exercising some control over these shonks to avoid risking the firm’s licence. Until now, there has been no real risk and thus many or most firms didn’t exercise much control, but hopefully that will change.
It is absolutely nothing like a hospital BK. The analogy is as offensive as the rest of the Lawyers, Banksters and Spivs gang. Real (ie non-commercial) hospitals have always existed independently of the financial world (save for the clinical Tradies like orthopods and urologists treating the worried well and inconvenienced): that’s why you cannot cite one example of such a shutdown for your gedankenexperiment. That’s why spivs like McMaster were laughed out of the Emergency Department when they pull stunts like getting the vapours at an RC. Biology has absolutely no regard for economics. Neither do those of us who work within its constraints.
If a F/P firm collapsed and its thus-enabled bloodsuckers were unable to continue to prey on the hapless it sounds like a fine result – better than anything the toothless watchpoodles could bring out.