In 2017 the Australian Securities and Investment Commission (ASIC) launched a
broad review of financial advice related to Self-Managed Super Funds (SMSFs).
This initiative was part of an industry wide assessment that scrutinised the
compliance of financial planners within a complex regulatory framework. ASIC’s final
report: Report 575 - “SMSFs: Improving the quality of advice and member
experiences”, focused predominantly on ‘Conflicts of Interest’ and adherence to the
’Best Interest Duty’ provisions and related obligations of advisers.
As part of the review, ASIC randomly selected 250 adviser files nationally for
substantive audits. Their final report deemed that 227 (91%) of client files
contravened the ‘Best Interest duty & appropriate advice’ provisions (s961B,
s961G); and 214 (86%) of the files found the adviser had contravened the
‘Conflicted Remuneration & Prioritising Client’s Interests’ provisions (s963G,
s961J). Although the number of files that contained Defective Statements of
Advice (s952E – providing false, misleading or deceptive statements or omissions)
was not provided in the report, the overlap of compliance breaches implies a very
high percentage of Statements of Advice (SOAs) that were also deemed to be
defective (i.e. many SOAs that contained conflicts or did not meet the best interest
duty, were automatically deemed to be defective).
ASIC’s enforcement approach in the SMSF sector has been widely observed as
particularly stringent, with a high percentage of advice documents assessed as non-
compliant under the evolving regulatory framework. ASIC has gone on record to
state that banning orders will act as a deterrence to financial advisers that provide
non-compliant SMSF advice. The significant shift of hundreds of billions in retirement
savings from Australia’s major banks and union-backed industry funds into SMSFs in
recent years has sparked considerable discussion within the financial planning
community regarding ASIC’s enforcement priorities in this sector.
As part of this review, ASIC requested a file from Nexus Private Financial Planning,
the business founded by Stephen G Vick, for assessment in 2017. Five years later,
in September of 2022, ASIC issued a five-year banning order against Mr. Vick, citing
alleged conflicts within his business model, compliance breaches, and defective
SOAs. This decision was made despite the fact that his advice adhered to the
processes mandated by his Licensee, and no financial loss had been suffered by
clients. Also, there was no suggestion at all that Mr Vick engaged in fraud,
misappropriation, or unethical conduct.
While legal experts strongly disagreed with many of ASIC’s findings within Stephen
Vick’s review, the regulatory framework means that even technical breaches of the
law are enough to enliven a banning order. The defence maintained that while errors
existed, Mr Vick’s advice caused no harm to clients, did not give rise to conflicts of
interest, did not suggest that Mr Vick was not fit and proper to provide financial
services, and did not meet the threshold required for a banning order. Additionally,
Stephen Vick had an unblemished compliance record for over 20 years prior to this
case.
It is worth noting that, during the same review, ASIC also audited Mr. Vick’s
mortgage brokerage business and found no reason to take any regulatory action
against him or the business. He was deemed a ‘fit and proper person’ to continue
on as the Responsible Manager for the Credit License of Nexus Private Lending
Services. The ‘fit and proper person’ test ensures that only individuals with “good
character, integrity, competence, and financial soundness” can operate in the
industry.
Ultimately, Mr. Vick made the difficult decision not to contest the banning order, as
legal costs would have exceeded $250,000 (win or lose) with no guarantee of
success. Having already transitioned away from financial planning prior to ASIC’s
decision, with no plans to provide advice in the future, challenging the ruling was
neither practical nor financially viable.
While Mr. Vick acknowledges that administrative mistakes were made, he maintains
that he has always acted with integrity, with a focus on responsible & practical
advice, and in accordance with industry standards. His case highlights the
challenges financial planners face in navigating an increasingly complex regulatory
landscape and the importance of clarity in financial services law enforcement.
*Note - According to Rainmaker Information the number of financial advisors in
Australia dropped from 26,500 to 16,671 between 2019 and 2022. IBIS World
reported that new professional standards implemented in 2019, prompted by the
2018 Financial Services Royal Commission (FSRC), lead to a substantial decrease
in the number of advisers.
