Dover’s Responsible Manager, Mr Terry McMaster, appeared before the Royal Commission in Melbourne on April 26, 2018. After two hours of evidence, Terry became ill and was taken to hospital. Dover has been contacted by several clients to comment on elements of Terry’s testimony and Dover’s procedures in general. This document addresses the main areas of such enquiry.
The Royal Commission spent a lot of time discussing the appointment of advisers to Dover. This occurred both before and during testimony by Dover itself. (That is, previous witnesses had discussed advisers who had previously been authorised by those witnesses but who had since become authorised by Dover).
Approximately 70% of advisers who contact Dover do not proceed to make an application to join us. When considering the assessment and appointment of those who do proceed, it helps to consider the ongoing compliance processes that exist after this initial appointment. Being appointed as an authorised representative of Dover does not allow an adviser to immediately start providing advice to clients. Dover supervises all advice at all times. Before advice can be presented to clients, it must be presented to our compliance team, where it is reviewed three times. Only advice that passes each level of review can be presented to clients and then implemented. If advice does not pass any level of review, it is not allowed to proceed and the adviser must correct or improve the proposed advice.
This process continues throughout an adviser’s appointment with Dover. Even our most experienced advisers are obliged to follow this mandatory review process. This means that every client can be assured that their advice was developed by four people (the adviser and the three reviewers). This review process is unique to Dover.
The Royal Commission criticized elements of Dover’s appointment process for advisers joining the group, in particular that Dover sometimes appoints advisers who have had compliance concerns raised at a previous Australian Financial Services Licencee (‘AFSL’). Where compliance concerns are flagged by a previous AFSL, our decision whether to appoint the adviser is based on whether that type of issue can be repeated at Dover, given the above supervision process. If the compliance issue previously noted would not occur within our system, we typically allow an application to proceed. If our system would not prevent this type of compliance issue, we do not allow the application to proceed.
In general, where we allow an application to proceed, it is where we consider that the previous compliance issue relates to a lack of supervision and support. As we believe our supervision and support to be above average, we do not believe that this creates a risk to clients of these advisers.
Specific Advisers Named at the Royal Commission
Three Dover advisers were named at the Royal Commission in relation to evidence provided by bank-owned AFSLs, with whom they had been authorised prior to joining Dover. The naming related to their time as advisers with those AFSLs.
Each of these advisers had been candid with Dover before appointment with us. Following their appointment, each of their statements of advice have been scrutinized by Dover prior to presentation to clients. No client has complained or otherwise indicated dissatisfaction with the advice.
In the case of one of these advisers, ASIC has also reviewed 12 complete client files prepared while the adviser has been with Dover. In one file, they noted some minor compliance issues, but concluded that the advice would still be of benefit to the client. As a general statement, they concluded that “Aside from that, the client files demonstrate that [this adviser] appears to be acting in the client’s best interests and providing advice that is appropriate for his clients. The concerns identified by Westpac do not feature as ongoing issues.”
Our experience is that, while with us, this adviser has been very proactive user of the support we offer. He and his clients have clearly benefited from our supervisory model.
In summary, the problems identified while the adviser was employed by Westpac (over an eight-year period) have not occurred within Dover’s system. This is consistent with our own review of the two other advisers named at the Royal Commission.
The Royal Commission also discussed two advisers who have been banned from providing financial services. One adviser received a life ban. This ban was the result of Dover’s compliance processes identifying a problem. Dover immediately terminated this adviser and brought his conduct to the attention of the regulator, who ultimately made the decision to ban him. The conduct relating to the ban did not concern advice itself; it concerned administrative shortcuts taken by the adviser. Dover does not tolerate advisers taking such shortcuts.
The other adviser was discussed at length at the Commission. In this case, the banning order did relate to advice. The advice was for some clients to discontinue using a particular platform. The affected platform provider complained to ASIC. The reasons for changing platforms were communicated to all affected clients and they all accepted these reasons. We reviewed the advice before it was provided to clients. At the time, we judged that the change of platform was appropriate. ASIC disagreed, and we accept their decision.
Our processes have been adjusted to reflect ASIC’s opinion in situations of this type.
Revocations by Dover
Dover does from time to time revoke advisers’ authority to represent Dover. This means that we remove an adviser’s ability to provide advice to clients.
The main reason for doing so is if an adviser manifests a poor attitude to compliance, and in particular the over-arching requirement that all advice provided be in a client’s best interests.
Sometimes an adviser will inadvertently breach a compliance rule. If this occurs, the advice will be remedied before it is delivered to clients. As long as the adviser demonstrates a keenness never to repeat the breach, we will not normally terminate that adviser (although we will prevent the non-compliant advice from being given to the client). However, if an adviser expresses any reluctance to reach and maintain the appropriate level of compliance, he or she will have their authority revoked. They will also have previously had any non-compliant advice stopped before it was provided to a client. Dover does not tolerate advisers who do not place their clients’ best interests first.
Client Protection Policy
Counsel assisting the Royal Commission criticized a document known as the ‘Client Protection Policy.’ (‘CPP’). Their criticism hinged on aspects of that policy that had the effect of protecting Dover. The criticisms were both that these protections to Dover were not allowed, and that it was inappropriate for these protections to be contained within a document called a client protection policy.
The client protection policy was revoked in March 2018. This was at the request of ASIC, who had reviewed the policy and drawn the same conclusions as the Royal Commission. This review process started in May 2016. In March 2018, ASIC required Dover to do the following:
- Revoke the Client Protection Policy;
- Agree not to rely on any item within the policy in responding to any client complaint;
- Write to each client who had been provided with an SOA since the commencement of the CPP, explaining that it had been revoked, would not be applied by Dover and reiterating that clients have a right to complain about poor advice or service.
Dover immediately complied with ASIC’s direction regarding the CPP. The problematic clauses had been added to the CPP over time and did not represent the whole document. The other clauses did contain information intended to protect the client. That said, Dover accepts that the name of the document should have been changed and the relevant clauses should not have been present.
The CPP no longer exists. While it did exist, it contained the direct contact details of Dover’s Responsible Manager, Terry McMaster, and an invitation to contact him with any concerns about the policy or anything else. No contacts were received from clients in response to this invitation. The third step above is currently ongoing but has largely been implemented. As of the time of writing, we have not received a client complaint based on clients learning that Dover will not rely on any item of the CPP.
Once again, we reiterate that clients always have a right to complain about any aspect of a financial adviser’s service. Our complaints process is set out in each advisers’ Financial Services Guide. Alternatively, any person wishing to complain can contact head office on (03) 8516 5350 or by email on email@example.com.