ASIC.0015.0001 ,4173

Memo

TO:

CC:

FROM:

RE:

ASIC Auslr,1l i.1n Securilie; & lnveslm•mls Commission

FA Ops Committee

John Weaver(Senior Manager- FA WMO)

Christopher Newby (Lawyer), Lisa Saunders (Lawyer) and Denise Dawson (Analyst)

NFA Recommendation - SCC Adviser A ndrew Smith {fillin "Insert SUBJECT of the memo. Press F9 if you wish to change a field."}

FILE REF: Andrew Mark SMITH (1486/16){fillin "Insert File Reference. if applicable"}

DATE: 20 November 2017

1.0 Adviser details

Adviser Name: Andrew Mark Smith (AR No: 1004210 and 284176) 31 December 1965 Date of Birth:

Reporting Licensee:

Current Licensee:

2.0 Recommendation

Westpac Banking Corporation (AFSL: 233714) (Westpac) Adviser authorised from 29 May 2007 to 24 April 2015 Dover Financial Advisers Pty Ltd (AFSL: 3070248) (Dover) Adviser authorised from 27 April 2015 to Present

2.1 This memo recommends that no further action be taken in relation to sec adviser Mr Smith for the following reasons:

(a) Since joining Dover in April 2015, Mr Smith has not received any client complaints, and Dover has not identified or reported any adverse matters.

(b) The most recent advice provided by Mr Smith relates mostly to insurance and superannuation with some advice ih relation to investments. A review of that advice by ASIC reveals some non-compliant but less serious advice compliance failures which we do not regard as sufficiently serious to continue the surveillance. Aside from that. tfle client files demonstrate that Mr Smith appears to be acting in the client's best interests and providing advice that is appropriate for his clients. The concerns identified by Westpac (as detailed at paragraph 3.4) do not feature as ongoing issues. For example. Westpac noted that the adviser had charged clients for an 'Ongoing Advice Service' (OAS) where no meaningful OAS had been delivered to the client. In addition, Westpac noted that the adviser had invested clients outside of risk profiles. Neither of these concerns were present in the material reviewed as part of the surveillance.

(c) Whilst Westpac has paid approximately $1 .2 million in remediation to clients of Mr Smith, a significant portion of that remediation was paid to 2 clients in circumstances where 1 client was a wholesale client and where the other client was found by Westpac to have shared fault. As such, it would appear that the remediation payments are not reliable indicators of bad advice.

(d) In the circumstances, it is considered unlikely that a Delegate would ban Mr Smith based upon the evidence received within the surveillance. The review findings of advice provided whilst authorised by Dover demonstrate that the adviser has otherwise:

i. identified the client's needs and objectives, the subject matter of the advice, and the relevant information applicable to the subject matter of the advice;

ASIC.0015.0001.4174

ii. provided sound advice, with the products recommended indicating that the clients appear to have been placed into a product that is suited to their needs;

iii. the expertise and authority to provide the advice;

iv. taken steps that would reasonat>ly be regarded as being in the best interests of the client, given the client's circumstances ..

2.2 Accordingly, it is recommended that:

(a) ASIC write to Mr Smith and Dover:

i. notifying ASIC's decision not to take any further action at this time, but pointing out the compliance failings identified and the actions required by Mr Smith and Dover to address the issues;

ii. reserving AS I C's rights to revisit the issue if further information is obtained.

(b) The matter is closed subject to the abov1e.

3.0 Background

3.1 As part of the Advice Compliance Project, Li1censees identified approximately 150 SCC advisers. ASIC resolved to consider the conduct of the sec advisers and if appropriate seek a regulatory outcome to protect consumers from the risk of continued! poor advice.

Westpac

3.2 Mr Smith was an authorised representative of Westpac from 29 May 2007 to 24 April 2015.

3.3 Westpac identified Mr Smith as a sec adviser by reason of 'gross incompetence'.

3.4 Westpac has undertaken a remediation process across 112 of Mr Smith's clients, and has paid approximately $1.2 million collectively to clients whether it be in response to client complaints and/or under the remediation process. For the files that have been the subject of assessment by Westpac, the thematic issues were as follows:

(a) Charging cl ients an OAS where no meaningful OAS had been delivered to the client;

(b) Market asset allocation issues and inves;ting outside of clients risk profiles;

(c) Delays in making trades for clients.

3.5 The above concerns relate to the period 2011 to 2015.

Dover

3.6 Mr Smith has been an authorised representative of Dover from 27 April 2015 to present.

3.7 There have been no client complaints, remediation or reports of misconduct to date.

ASIC's Surveillance

3.8 On 13 March 2017, ASIC requested informaltion from Westpac in relation to complaints and remediation. 1

Following Westpac's response, on 12 May 2i017 ASIC requested client fi les for a sample of clients who had been subject to Westpac's remediation program.2

3.9 Given the age of the reported misconduct by· Westpac (between 2011 and 2015), the surveillance focussed on Mr Smith's recent advice at Dover, by reference to the types of advice and thematic issues identified by Westpac. On 12 May 2017, ASIC requested information from Dover in relation to audit history and client information. Following Dover's response, on 29 August 2017, ASIC requested client files for a sample of clients who had most recently received personal advice from Mr Smith.3

3.10 ASIC's review4 identified potential breaches of s961 B, s961G, s961J and s947D (ASIC's Review). a summary of which is provided at Appendix A.5

4.0 Recommended Action

1 8arcode 800646729 2 8arcode 800646790 3 8arcode 800646948 • Consisting 5 Westpac files and 10 Dover files 5 ASIC's Review was conducted by Denise Dawson (Analyst)

2

ASIC.0015.0001.4175

4.1 Based on the surveillance to date and in light of the matters raised in this memo, we do not regard the potential breaches as serious and as such it is recommended that no further action be taken in relation to Mr Smith for the reasons stated at paragrapt1 2.1 above. We recommend writing to Mr Smith and Dover in the terms suggested in paragraph 2.2.

3

ASIC.0015.0001.4176

Appendix A - Summary of ASIC's Finding's

No Client s961B s961G s961J s947D Summary of client situation Summary of ASIC's Review

Dovor (f\lllcliontfllo~rorv-~~w~)~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~--1 Pass Pass Pass

Pass Pass Pass

Pass Pass Pass

Suoerannua!ion

--are a married couple in their earty to mid­~fred and • is worl<ing part-time as a corrq:>any director earning $50,000 pa. They have three (3) adutt children.

The file indicates the clients have an existing SMSF with a current balance of $4,573,858.

are long term clients of Mr Smith.

Suoerannuation

..... l!llare a married couple with no financial dependants, They have one adult daughter, aged 31.- is aged 65 and retired, and - is aged 63 and continues to work as a Marketing Consultant earning approx $30,000 pa. Their living expenses are approx $120pa with the remaining income being drawn from their SMSF.

They have recently sold 1heir principal place of re$idence worth $3,400,000 in order to downsize in retirement and they are looking to use some of the funds to top up -superarviuation fund prior to her turning 65 in 2018. - is already aged 65 and no longer working, and is unable to contribute to super.

••••• are long term clients of Mr Smtth.

Retirement Planning

SOA 13/06116)

Summary of the review: I. Strategic advice has been provided. A re-con~n

strategy has been recommended that will see-.:iraw his minimum pension payment p1us an additional lump sum from the SMSF and for to make a non­ooncessional contribution to super to increaseJilill•I member balance. The advice is made in l•ne with the proposed budget changes amounced on 3 May 2016 that wolld see a limit on funds in pension phase to $1.6 million and a cap on non-concessional contributions to $500,000 per person dating back to 1 July 2007.

2. The advice is appropriate and in the best interests of the clients.

SOA 12CY04/16)

Summary of the review:

I . They have received strategic advice for - to maximise her non-concessional contributions to superannuation before she turns 65 and to maximise and to further increase their superennuation to take advantage of the concessionally taxed super environment for their retirement. The contributions include: (a) $180,000 before 30 June 2016 (b) A further $180,000 in July 2016; and (c) Another $540,000 contribution in July 2017.

2. The advice is strategic advice only with the investment advice being in a ROA document once the contribution has been received by the SMSF, and in line with a full portfolio investment of the SMSF. Given the $180,000 contribution is approximately 15% of the current fund balance of $1 ,203,000 a ROA is considered appropriate for the investment advice.

3. Tne file IS comprehensive and well aocumentea ana there is a clear record of regular communication between the adviser and the clients. The advice is api:x-opriate and in the best interests of the clients.

SOA 124102117)

No Client s961B s961G s961J s947D

4. - Pass Pass Pass

Pass Pass Pass

Su mmary of c lient situation

l•l•I• are a married couple who are both in their early 70s. They have no children or financial dependants. They are both still worlling part-time. - runs his own business as a Sound Engineer however does not derive an income from this (the business has operated at a loss over the last two financial years). - works as a school teacher and earns approximately $36,400 pa.

They have an existing SMSF under advice with Mr Smith currently valued at $495,000, and an existing Term Deposit of $100,000. They are looking to apply for the CentrelinkAge Pension now that the eligibility rules have changed post 1 January 2017 to see if they are eligible for a pension that will supplement their existing income.

are long term clients of Mr Smith.

- is age 44 and - is age 35. The are married and !lave"i'hree boys aged between 9 and 4 is due to have their fourth child in mid-February 2017. is employed as the Managing Director of Buying at and earns $1 ,180,000 pa. Lena is a Lawyer worlling part-time and earns approximately $50,000 pa.

- exisli'lg insurance cover as follows: Ute· $2.121.800

TPO • 51 ,591.350 Trauma - $318,270

Linked Children's policies -······· $212,180

The file indicates the clients were referred to Mr Smith by one of his ex-St George Bank colleagues.

Superannua!ion

are a married couple with two cnldren

aged 24 rejrs il are still financial dependants. - is age 55 and is age 46. - is a Designer (Shop Fltouts) and a Direc or o is own company and earns $200.000 pa. He is also expecting a substantial dividend from the business FY

s

ASIC.0015.0001.4177

Summary of ASIC's Review

Summary of the review: 1. Mr Smit.h has provided the clients with a SOA specific to

applying for the Centrelink Age Pension. The clients are semi-retired and with the Centrelilk changes iltroduced 1 January 2017, the Adviser has identified the dienlS may now be eligible for the Centrelink Age Pension which will assist them to meet their income needs.

2. The file is comprehensive and well documented and there is a clear record of regular communication between the adviser and the clients. The advice is appropriate and in the best interests of the clients.

SOA 12/02/17)

Summary of the review:

1. The SOA reviewed is a simple piece of advice that covers insll'anoe advice to and is specific to adding their youngest chi d elCistin insurance policy. The two older boys are currently listed on the policy.

2. Mr Smith has recommended $212, 180 of cover for. to be linked to - ~licy in line with the client's request for this oover to ensur has the same cover as

3. The file IS comprehensive and well documented and there is a clear record of regular communication between the adviser and the clients. The advice is appropriate and in the best interests or lhe ciienls.

SOA (26'10/15)

Summary of the review:

t. They have an existing SMSF and insurance portfolio in place and have received advice to review their insurances and review their SMSF inveslment portfolio. The SOA reviewed for ASIC's file review relates to the SMSF

No Client s961B s961G s961J

Fai Fail Fail

sM70 Summary of client situation

2016 - $150K - $200K gross. is a Business Analyst in the Fashion industry and earns $160,000 pa.

are long term clients of Mr Smith.

Fail Insurance

- is Age 28 and in a defacto relationship with no financial dependants. - works as a Civil Engineer with s q ney Trains and e~100,000 pa. He and his partner have recently purchased a home which is valued al $795,000 and the loan value is $780,000.

The file indicates - is seeking income protection insurance advice. He has existing Life and TPD cover with First State Super for $260,000 and income protect ion cover for SS.ODO monthly benefit. 90 day wait and 5 year benefit period.

The file indicates the adviser Mr Smith offered lo provide the client with comprehensive insurance advice and provided the client with a quote based on the types and amounts of cover ho would recommend given the dienfs circumstances. The client declined the offer and requested advice in relation to income protection insurance onty.- will also arrange to increase his Life and TPD cover in his existing First State Super account.

6

Summary of ASIC's Review

investment portfolio review advice.

ASIC.0015.0001.4178

2. The SOA reviewed was sooped to superannuation and investment advice only and included a recommendation to make some investment switches within the existing SMSF investment portfolio. The advice is appropriate and in the best interests of the clients.

3. The file is comprehensive and there is a clear record of regular communleatlon between the adviser and the clients. While client meeting file notes are not present on this file, the file still indicates there is regular oontact with lhe clients and advice documents and client instructions have been recorded on the file. On this basis, there are no sigrificant issues or concerns presented by the file.

SOA 128109116)

Summary of the review: t. This file has failed ASIC's file review under s961B., s961G

and s961J. The lailure is based on the adviser's failure to investigate and assess the client's existing First State Super product as a suitable income protection insurance product for the client. Tho adviser has also faied to obtain the client's expense information to assess the affordability of owning insurance cover outside super.

2. The file has also failed to meet the disclosure obligations under s947D as the SOA failed to include replacement of product advice information lo reflect lhe replacement of the existing First Choice Super income protection product with the reocmmended AJA insurance pro:luct.

3. However, the advice is not neoossarily a reflection of poor advice and the client wilt benefit from the following:

(a) Owning a policy outside of the superannuation environment thal will not be subject to super benefit payment rules at time of claim.

(b) The client's superannuation balance will not be reduced by ongoing income protection insurance premiums.

(c) The cost of the insurance premiums are tax deductible to the client

(d) Level insurance premiums will save the client on the cost of the cover over the long term.

ASIC.0015.0001.4179

No Client s961 B s961 G s961J s9470 Summary of client situation Summary of ASIC's Review

Dover (lite client me_re~v_le_ws-:.)'----~---------------------------~---------------------1 7.

8. -

Superannuation

- is a~ 57 and - 58 and !hey have one adult da:lQhler toot dependant). is a Credit Manager with Westpac Bank and earns $160,000 pa, and works as a Receptiorist for a Physiotherapy Business and earns $20,000 pa. Their annual living expenses induding loan repayments are $50,000 pa.

Assets: Home $1,200,000 (no home loan) Cash (Joint) - $30,000

Asgard eVlrap Super - - $420,000 Asgard eVlrap Super - · $54,000 Asgard lmestment Portfolio (- . $180.000

Liabilities:

Investment Loan (Asgard eWrap Inv) - - $200,000

are long term clients ol Mr Smith.

- i; age 45 and is a self·employed Lag er earning $150,000 pa. He is married and has a wife (Age 40) and two (2) young boys age 4 and 7. His family's living expenses are approximately $50,000 pa.

Due to family commitments,- spends approximately 6 months of the year in Australia and the other 6 months in Germany. His clientele is based wholly in Austra!ia and he continues to conduct his practice while he is in Germany.

Assets: Home (Joht) $800,000

Cash - $50.000

SOAl10/10116l

Summary oflhe review: 1. Pass 2. Review existing~rd eWrap Super Portfofo

investments for - ($420,000) and - $54,000). Recommendations were made to switeh some investments in the portfolio (the reasons for the reoommendations were included in the SOA, as well as the consequences of the advice and all fees were disclosed).

3. Maximise Concessional Contributions to Superannuation. This strategy is in the dienfs best interests given their substantial disposable income and the fact that they are appROAching 60. Thisstrategywill assist them to build thet super balance for r .. ir m

4. Split - Concessional Contributions with This strategy is an effective way of topping up superannuation balance and will help protect the client's from the impact of potential government proposals (now legislated).

SOA I 14/0g/16)

Summary of the review: 1. Pass 2 . Replace existing levels or Ue, TPD, Trauma ano Income

Protection Insurance with St George Protection Plans on a Ike-for-like basis with AIA Insurance. All cover is outside super and is for the following amounts: (e) life: $519,000 (I) TPD: $51g,ooo (g) Trauma: $380.000 (h) Income Protection: $7,500 monthly benefit, Agree

Value, 90 day wait, to Age 65 benefit, stepped premium.

3 . The recommended cover ison a like-for·likebasis and is cheaper for the client by approx $77 per month (Sg24

a . The information disclosed is considered to meet the

e The Lite Review (Pre.Review A.sffssment) i$ not a C lient fi le: Review and does not provide viaws on compliancf.! wtth specific oblig.at.ions, Its purpose it: to as.$ess {at a high level) whether adVica concerns might be apparent that would warrant a Client file Review.

ASIC.0015.0001.4180

No Client s961B s961G s961J s947D Summary of client situation Summary of ASIC's Review

Asgard eWrap Super - $85.635 reQuirements under s9470.

Liabilities: No existing fiabilities

Existing Insurance - BT Protection Plans: Life: $534,615 TPO: $534,615 Trauma: $393,927

Income Protection: $7,741 monthly benefit, Agree Value, 90 day wail. to Age 65 benefit, stepped premium.

There is an email on file from the client which indicates he is looking to save money on his insurance cover and is happy to look at a different plan .

- - s a long term client of Mr Smith.

9. - - Superannuation SOA {19108116\

. is age 48 and is a Manager I Sales and works in Summary of the review: Practice earning approx $80,000 pa. - is age 43 1. Pass. self-employed Obstetrician and eams approx 2 . Reorganise the current SMSF investments so the client

$800,000 pa. and - are married and have one has better oversight over their holdings and a plan they dependant chi ld age 6 . understand going forward. (This involves moving from a

Med IQ custodial account with HSBC to a BT Panorama

~nd IJl!!thave an existing SMSF that was Investment Account and to invest in line w ith the client's ed y ano er adviser at MedlQ. The file notes risk profile).

indicate they are not happy with MedlQ and are not really 3. The increased cost of the new SMSF investment

aware of how their SMSF is invested and are frustrated with structure has been disclosed and explained i'I the SOA. their advice relationship with MedlQ. The client is based in Sydney and their exist11g adviser

MedlQ is located in Melbourne. The file i'ldicates they

Assets: are unhappy with their existi'lg relationship and confused by what they currently have and therefore they will

Home $1 ,900,000 benefit from a simple investment structure with the CaSh (Joint)- $1,000 recommended BT investment wrap that has simple and Property Redraw Facility- $433,000 transparent reporting and they will be able to more

- $180.000 readily access their adviser in a face-to-face setting if

PSS Super - $28,754 they WlSh.

4. Consider maximising the concessional (employer) contributions to super to help build on their super assets

LiabilitiC$: over time. The clients are in a position whereby - is a verv hioh income earner and the fi e indicates lhev

8

ASIC.0015.0001.4181

No Client s961B s961G s961J s9470 Summary of client situation Summary of ASIC's Review

Property (Jeductible) -$50,000 have capacity to maxirnse their contributions to super. Property (\Ion-Deductible) - $1 ,100,000 The existing SMSF super balance is relatively low and is

Credit Card • • $30,000 more than likely a reflection of being self-employed and

Credi t Card • - $5,000 not making regular contributions. Tris recommendation wi8 assist them to build on their wealth in a tax-

Car Lease· --S15,000 advantaged environment. 5 . The advice includes a statement that personal

They have insurances that are being managed by an adviser insurances were not included in order to not further rrom MelbDume and w111 provide an updated copy or the complicate the SMSF change at this time.

- .. insurance details to Mr Smah when they are fina:ised.

10. - . Wholesale investor Summary of the review: 1. On the basis the c lient is a wholesale investor, a full - is in his late 40s and has a new panner (de facto) and ASIC file review has not been completed.

has three children to his previous marriage aged between 18 2 . The client has an existing SMSF, Family Trust and

and 23 (all financially dependant). He is the ex-COO of - Personal Investment portfolio. The tile indicates the nd is currently on Gardening Leave after tea~ng in adviser is providing ongoing advice for all three (3)

February 2017.- inocme was $1 ,040,000 + bonus. entities and has issued eight (8) SOAs and nine (9) ROAs to the client over the period 2511112015 • - is a long term client of Mr Smith. Mr Smith is in regular 12/06/2017.

contact wilh and provides l imited pieces of advioe on a 3. The file is comprehensive and does not raise concerns

regular basis. over the advice being issued by Mr Smith.

Westpac (full client reviews)

1 1. - Pass Pass Pass Fail Investment insurance and superannuation SOA {13107113\

- is age 52 and - is age 46 and they are married Summary of the review: with three young gins, one aged 10 and twins age 7, 1. have received advice to establish an

SMSF and rollover existing funds and contribute existing

• a Banker and works for Origin Capital in Sycney and investments into the SMSF as concessional contributions runs a small millinery business. 1s paid via a (total value $672,500), establish a TTR strategy for p

Trust structure and the income is split between himself and as a tax-free investment that can be used to assist \Ml - approx. 50/50 ($1 SOK each pa .~~lso earns education funding, to use existing net cash flow to retire approx $2D,OOO pa from her millenary business. non-investment debt and to increase their e><isting

insurance cover to ensure they have approp1iate risk

~nd-are seeking advice in relation to funding insurance in place. The advice indicates they will meet their goal of achieving $100,000 pa income in retirement.

tneir g rls' igh school education, ensuring they have 2 . The advice to establish the SMSF would appear to be in appropriale insurance cover, to build wealth for retirement and retire non-investment debt. .....,ants to establish an SMSF

the client's best interesl This also takes into

to allow him greater flexibility w fth investment choice consideration- employment and investment

particularly with investing in agricultural investments for whicli experience as a Banker working for a corporate advisory

he w ill make his own investment decisions. and private equity investment group.

3. The SMSF structur~ ~ve the clienfs the flexibility with investments for to invest in his own

ASIC.0015.0001.4182

No Client s961B s961G s961J s9470 Summary of client situation Summary of ASIC's Review

investments accordingly. 4. The education funding goal is addressed in the advice

and it would appear investing in the tax advantaged superannuation environment would leave the clients in a better position particularly g iven the incomes they each receive from Trust distributions and the applicable marginal tax rates outside super (possibly highest MTR). Although there are no projections provided to include the intended withdrawals from super to fund the girl's education expenses the advice does indicate further advice will be issued when the time comes to convert

5. ""'super to a TTR lo fund the education expenses.

y ave also received advice to establish insurance cover with St George Protection Plan which will provide them with comprehensive insurance cover as they are currently underinsured. The ownership structure is inside and outside of super providing them with tax-effective payment of premiums and comprehensive insurance features.

6. Section 9470 has failed as the adviser has only partly fulfilled his disclosure obligations. As the recommendation is to replace existing investments and super products with an SMSF and this a more d ifficult comparison to make than the standard like for like replacement of product switches, the adviser has fallen short in a number of areas such as like-for-like comparison of insurance products, ensuring research into all existing products and consequences of switching product is on file and disclosed in the SOA.

7. The file indicates the advice is in the best interests of the clients, is appropriate and there is no conflict present. While s9470 failed, this would not be considered to be of any great disadvantage to the clients.

12. - Fail Fail Fail Fail Superannuation and insurance SOA 110/10114)

cddren are a couple in their late 40s with three Summary of the review:

Their eldest son is 18 and they have 10 year old 1. The clients have received advice to establish a SMSF and twins. invest in a diversified investment portfolio, review

insurance and apply for comprehensive cover, establish a

- is a Lawyer and earns $95,000 and - is a Claims Family Trust, review their estate planning needs,

Officer with HCF and earns $168,000pa with an additional retirement planning with their $100K pa income goal in

$15,000pa bonus . • also receives an additional mind and tax minimisation.

$88,000pa in renta income from their investment properties. 2. The SMSF was established for the clients prior to advice beina oresented. This indicates the adviser d id not intend

10

ASIC.0015.0001.4183

No Client s961B s961G s961J s947D Summary of client situation Summary of ASIC's Review

on considering alternative super accounts for the dienlS

have lwo current investmen- erties and proceeded to provide advice without the provision of valued at S2,150,000 in addition to their PPR. has an appropriate advice document.

$170.000 wilh Legal Super wliiiiximately $280.000 Life 3. The initial meeting file note captures the cient's current and TPD insurance inducted. has $612,000 ~th situation and identifies their goals on a high level. However IAGINRMA Super w ith approx $580,000 in Life and TPD cover the absence of a Fact Find document to confirm their attached. detal s, their actual goals and product preferences and a

risk profile document have not been provided on file for 9i1in additional 5366,000 in Life Cover wltn a earvlew review.

has salary continuance oove1 provided by he1 4. Although the clients have received advice to establish an employer with a 2 year benefit period. SMSF and roll el<isting funds over, the replacement of

product information in the SOA is not adequate and does not include the existing insurance cover owned in their exlsnng Legal Super and IAGINRMA Super Funds to provide a comparison of lhe costs with these products. The initial meeting file note indicates they each had Life and TPD cover inside thei" existing super funds.

5. There is no oompleted and signed Investment Strategy on File. There is no SMSF Trust Deed on file. This is anolher indication of poor record keeping. The adlliser will be providing ongoing investment recommendations and needs to ensure his recommendations are in line with lhe SMSF Strategy and also has a d uty to ensure the clienls are meeting their SMSF Trustee obligations.

6. The adviser tai led to address their goal of having $1 OOK ilcome in retirement.

Westpac (lite client file reviews)!

13. - - . - fu!Qerannualioo l1QPi:§

sage 78 (as at October 2015) and is married Summary of the review: with no financial dependants (adult children). is a 1. File consists of ROA documents that reference SOAs Radiologist and continues to work part-time earning approx dating back to 3110312008 and 0210912011 which are not $460,000 pa. He intends to fully retire approx Age 80. on file. SOA on file is dated 30/0312007. ROAs are

generally buy I sell reconmendations For the existing

- has an existing SMSF with a Corporate Trustee for SMSF investment portfolio. Which he is lhe sole director and sole member • 2. There is limited information available ror review by ASIC.

1n relation to Me SMSF Investment ~~:o~~~t~~~oid~~e~~it~ All SOAs referenced in the ROAs on file have not been provided to ASIC for review. In the absence of the SOAs

portfolio of direct shares and managed funds invested in and file notes to record the client meetings and accordance with a G<owth Risk Profile. - received subseauent discussions held with the client it cannot be

1 The Ute Review (Pre·Review Assessment) is not a Client file Review and does not provide views oo compliance with specific obligations. Us purpose is to assess (at a high level) whether advice concerns might be apparent Iha! would warrant a Client file Review.

11

No Client s961B s961G s961J

15. -

sM70 Summary of client situation

advice on 20 March 2007 which indicates he was assessed at a Growth Risk Profile 80120 Growth I Defensive asset splil At the time he was Age 70 and his SMSF portfolio value was $1 , 172.579.

Superannuation

- is age 74 and married to. age 70 and they have no financial dependants. - is a semi-retired psychiatrist (working one day per week! and intends to keep working for the foreseeable future. is retired. Their joint income is circa $200K pa.

l••••••lhave individual Asgard eWrap pension accounts and the file indicates they have received regular ongoing advice in relation to the underlying investments in thei' respective Asgard pension funds.

They also heve an SMSF wnch was established in 2006 however the file does not indicate they have received regular ongoing adlrice from Mr Smith in relation to the SMSF. There is no SOA on file in relation to the establishment of the SMSF or further indication of ongoing advice in relation to the SMSF.

Wholesale investor

age 8 and Statemento

are married and are both semi-retired . • is is age 67 at the time of receiving their

vice issued on 14 March 2013.

ASIC.0015.0001.4184

Summary of ASIC's Review

further verified if the ongoing advice remained appropriate for the client and was in the dient's best interest in accordance with the previous advice he had received from St George Private Bank.

3. The file does clearly show there was regular dient contact and ongoing service was provided to the dient. Ttis is also supported by the remediation file note. There are no conflicts present on this file.

Summary of the review: 1. File consists of ROA documents that reference an SOA

dating beck to 3110312008. This is not on file. SOAon file is dated 30/03/2007. The ROAs are buy/sell recommendations for the existing Asgard eWrap pension portfolios.

2. The file indicates the clients received regular. ongoing advice from the Adviser which appears to be in six monthly intervals. Thi• file indicates the Adviser has pcor record keeping procedures with i mited information available for review by ASIC particularty in the way of file notes to reflect the six monthly meetings IMth the clients.

Summary of the review: 1. This file presents an issue for ASIC's file review procedure.

The advice provided to the clients is both Pre-FOFA and Post-FOFA coupled with the fact the dienrs iritial investments in Westpac Capital Notes were on the basis of an Execution Only Transaction. The investments in 2014 are for large amounts of $1 mil, $ 1.5 mil and $2.2 mil and on this basis the client would be considered a wholesale investor.

There is limited information on file for the clients. It would appear they have existing SMSFs and want to achieve a higher rato of interest that their current cash investments within the SMSFs. They have not chosen to disclose the existing 2· The clients have received limited advice from the adviser

to invest in hybrid investments - Westpac Capital Notes 2 and CBA Perls II.

investments within their respective SMSFs and the advice is limtted to investing cash into Westpac Capital Notes.

has $100,000 cash in his SMSF -­and has $1 ,050,000 in he~

has not disclosed the actual 12

3. An initial Execution only transaction was completed on 22102/2013 for the clients with $1 00K West c Captial Notes purchased in and $300K Westpac Capital No es pur ase 1n

ASIC.0015.0001.4185

No Client s961B s961G s961J s9470 Summary of client situation Summary of ASIC's Review existing balances and underlying investments within his 4. Further Capital Notes were purchased after a SOA was SMSFs and . has disclosed she has $850.000 in Cash issued to the ciients on 14 March 2013 for a further S100K and $200,00 1n s ares. They want to invest the existing cash West ac Capital Notes purchased in funds in a product that has a Defensive asset allocation in and $450K Westpac Capital No1es purcnaseo m accordance with their risk profile that will see them earn higher returns than was is offered by cash or terms deposits. 5. Additional Westpac Capital Notes 2 and CBA Perls II

investments were purchased in 2014 and an ROA was

The client profile booklet and SMSF Investment Strategy provided for these transactions. The invested amounts

Workbook indicates the client did not want to review any1hing would be considered Wholesale investor amounts at $1 mil,

else at the time the advice was provided and declined to S1.5 mil and $2.2 mil.

receive comprehensive advice. The client has also declined ongoing advice services.

13