Check against delivery

Good morning everyone. It’s a pleasure to be here with you.

I would like to begin by acknowledging the Turrbal people and the Yuggera people as the traditional owners and custodians of the land we are meeting on. I pay my respects to their elders past, present and emerging – and extend that respect to Aboriginal and Torres Strait Islander people here today.

One of my first speaking engagements this year was as part of the FAAA Roadshow. So it seems fitting to be joining you as the year draws to a close.

In a moment, I want to speak about a few key things to keep front of mind when advising clients. But before I do, I would like to reflect on the role of advice in ASIC’s priorities.

Advice has received a lot of attention in recent years – with multiple waves of reform leading to the introduction of a best interests duty, the banning of most forms of conflicted remuneration and the phasing in of enhanced educational requirements, among other things. And there is, of course, more reform on the way as part of the Delivering Better Financial Outcomes package.

That is not surprising, given the importance of good advice to people who seek it.

They place their trust in you to help them manage what for many is their most valuable asset – their retirement savings. Their wellbeing and quality of life in retirement depend in large part on the quality of the advice that you provide.

The reforms I have mentioned have undoubtedly made it more likely that clients will receive advice that will advance their interests. But it’s also important to say that ASIC continues to see too many examples where advice leads to poor, if not devastating, outcomes for consumers.

Our recent investigation into investments in the Shield Master Fund – which you may have seen reported in the media – is a prominent example.

We understand that in a two-year period more than $480 million was invested in this fund by thousands of people.

Potential investors were called by telemarketers and referred to financial advisers. They were advised to roll over from their existing superannuation funds and to put part or all of their superannuation into the Shield Master Fund. Many did so via superannuation products provided by Macquarie and Equity Trustees.

While our work on this matter continues, and it involves a broad range of entities, it is important to note that some advisers appear to have played a crucial role in advising consumers to invest in Shield.

I wish that I could say that this is an isolated example. But it is sadly similar to a pattern of conduct we are seeing all too frequently – where telemarketers recruit people and hand them over to advisers.

Those advisers then encourage people to move their super from what is sometimes a relatively well-performing fund into a platform product or self-managed super fund, with their precious retirement savings invested in high-risk property or crypto investment schemes that are highly unlikely to align with the best interests of the consumers involved.

I make these comments as a background to introducing ASIC’s strategic priorities for the 2024-25 year, which were released in August.

There are five priorities, but I’ll focus on two.

The first, quite deliberately, is to improve consumer outcomes. That is no accident. Because one of our key functions set out in the ASIC Act is to promote consumer protection in relation to the Australian financial system. This will include ongoing work on the design and distribution obligations, predatory sales practices and dispute resolution.

The second is better retirement outcomes and member services. And, while this includes our work to drive better services for members of superannuation funds, our work in this area is not limited to super. It also includes a focus on compliance with legal obligations by entities and individuals involved in the provision of financial advice.

This focus is also reflected in our 2025 enforcement priorities, announced earlier this month, which include misconduct exploiting superannuation savings and unscrupulous property investment schemes.

You should expect to see ASIC being very active in these areas over the next year, making use of the full range of our enforcement tools.

I hope that’s a message welcomed by people in this room. Because I think we share an objective of preventing consumers from falling victim to financial advice that is manifestly inappropriate to their needs.

Promoting good client outcomes

While people are always keen to hear about the areas of focus in our enforcement work, I am also often asked about whether we see any examples of good practice in financial advice. And the answer is, of course, yes.

So in the remaining moments I have, I’d like to briefly touch on three key things we think all advisers should keep front of mind to promote good outcomes for their clients.

Ensuring advice, and actions taken in providing it, are centred on the client interests

The first is ensuring advice, and actions taken in providing it, are centred on the client interests.

The best interests duty in financial advice is not new. But it is helpful to take a step back and focus on what it means and how to demonstrate that it has been applied.

In ASIC’s view, this involves:

• Properly understanding your client’s circumstances and objectives, and tailoring your advice accordingly.
• Applying your professional judgement, to identify appropriate strategies and products, taking those circumstances into account – with a focus on improving outcomes for each client.
• Explaining why the recommended strategies and products are appropriate, considering your client’s relevant circumstances. This includes providing reasons for recommending each course of action, and explaining why each recommendation meets their needs.

It is also essential advisers and their licensees ensure that conflicts of interest are managed – and that recommendations to clients aren’t being driven by one-size-fits-all business models.

Maintaining an ongoing focus on product performance

The second aspect of good practice I’d like to focus on is maintaining an ongoing focus on product performance.

When recommending financial products, identifying good quality products that meet a client’s needs is a necessary starting point. But the focus on performance should not stop there.

It is also critical that advisers and advice licensees maintain an ongoing focus on the performance of the products held by their clients under advice – and their ongoing suitability for each client.

This was a key message in the report we released earlier this year on superannuation choice products, examining the role of super trustees, financial advisers and advice licensees in situations where superannuation choice products had persistently underperformed [REP 779].

We found that there was often insufficient focus on performance and a lack of evidence around how trustees, licensees and advisers were considering persistently underperforming investment options.

When providing personal advice about investments, advisers must investigate and assess those investments to detect and address underperformance – drawing on a range of information sources.

The fact that an investment is ‘approved’ by an advice licensee or has a particular external research rating does not mean advisers should ignore its performance when providing investment advice.

Likewise, licensees should have rigorous processes in place to detect underperforming investments that have been approved for use by their advisers – and address them a timely manner.

Where underperformance is identified, an adviser must communicate why their recommendation is appropriate. This applies whether an adviser is recommending to redeem, retain or acquire an underperforming investment.

Demonstrating how advice meets the required standards

The third issue I’d like to focus on is demonstrating how advice meets the required standards.

The best way to do this is, of course, by maintaining good records as part of the broader client file, beyond the advice document.

This is an area where ASIC has seen improvements over recent years.

As part of work completed for the Life Insurance Framework review, ASIC observed that record-keeping across the client advice files had materially improved between 2017 and 2021, helping advisers demonstrate that they had complied with their obligations.

As you will be aware, the government has committed to replacing the Statement of Advice with a more fit-for-purpose, principles-based advice record as part of tranche two of the Delivering Better Financial Outcomes reforms.

The streamlining of these advice records will see record-keeping across the rest of each client’s advice file being as important as ever. It will no doubt also stand advisers in better stead if advice files are scrutinised by licensees, the Australian Financial Complaints Authority, ASIC or the courts.

Conclusion

In closing, I’d like to recognise that financial advice is in high demand and that you are working hard to service your clients, comply with your existing obligations and adapt to reforms. We are committed to working with you to maintain the high standards your clients expect – and need – from you.