Chapter 10 – ASIC’s review of Florence Tee’s advice. Another study in incompetence

First let’s summarize what happened. It only takes a few paragraphs.

Katrina rang Dover and asked if someone could organize fresh life insurance policies. An AMP consultant had already advised her, and in effect quoted her about $20,000 in fees/commissions over the first ten years of the policy’s life. Katrina, understandably, thought this was a bit steep.

Katrina had been told Dover did not accept commissions and rebated all commissions under the McMasters’ Commission Rebate Scheme. This mean the $20,000 would stay in her super fund’s account, or otherwise within her control and remit, and would not be wasted.

It’s clearly in Katrina’s best interests that her new life insurances be set up this way:

  1. all premiums are effectively tax deductible, via (prior year) deductible contributions and
  2. all premiums are effectively reduced by the rebated amounts.

This is the most cost-efficient way for Katrina to hold her new insurance policies. She gets a tax deduction, reducing the net cost by a further 30%. The commission refunds over the next 10 years will be more than $20,000.

That’s a lot of money to someone with only has $32,000 in super and no other assets other than a mortgaged home shared with disabled parents.

Florence did a great job. It was a nice gesture

Florence did a great job. She organized Katrina insurances in just one week, in time for the loan to proceed smoothly.

All boxes ticked off. Well done Florence Tee. Well done Vietnam team.

What would Mr Hayne think?

Florence was ahead of her time.This was exactly the sort of service level and fee structure Mr Hayne[1] was to recommend a few years later in the Royal Commission into Misconduct in the Banking, Financial Services and Superannuation Industries.

One expects Mr Hayne would approve: he made his views on these matters clear many times during his Commission. Mr Hayne dislikes commissions and fees for no service. Mr Hayne should like Dover: it did the job for about 2% of the quoted AMP fee.

That’s got to be in the client’s best interests.

 But what did ASIC think of Florence’s advice to Katrina?

 ASIC did not agree with Mr Hayne. ASIC provided “Example 4 The advice of Florence Tee” to the Royal Commission as evidence of serious wrongdoings at Dover.

You can read its analysis here:

 That’s heavy stuff: ASIC is calling Florence a predator and a fraudster

ASIC’s four grammatically challenged paragraphs drip with suspicion and disbelief.

ASIC basically says Florence and Katrina, two people who never met, are conspiratorial liars. ASIC even says Katrina did not initiate contact with Dover and Florence is not telling the truth when she writes that Katrina did contact.

ASIC says it’s not about Katrina arranging $800,000 of life insurance to cover her $800,000 mortgage as required by her bank. No, ASIC writes “the major driver” must be a ruse set up by Florence for Katrina to get her money out of super prematurely. ASIC then argues in the alternative (just in case) that this is bad advice anyway because soon Katrina’s super will run out. And, anyway, why did Florence not advise Katrina on risk insurance?

ASIC bravely asserts that Dover Legal Pty Ltd did not approve the SOA before Florence sent it to Katrina. How could ASIC say that? How could ASIC know?

If any doubt crossed ASIC’s collective mind it must have been quickly dismissed. They gave the Royal Commission an unqualified set of damning propositions intended to ruin Florence’s career[2]. They never checked their facts or conclusions with Dover. If Kell engages to note a preference for Dover to be closed then Dover must be closed. The evidence must be retro-fitted to Kell’s closing conclusion. Don’t risk the game plan by speaking to Dover.

Unpacking ASIC’s review of Florence’s advice

Let’s take it sentence by sentence and unpack ASIC’s review of Florence’s advice.

1        The advice scenario is peculiar. It suggests the adviser has contacted the client and sought assistance in transacting insurance applications and superannuation rollover.  However, there is conflicting records of this[3].

There are no “conflicting records” suggesting Florence contact Katrina. None. ASIC made this up. The records clearly show Katrina contacting Florence.

For ASIC to be correct ASIC must believe Florence:

  1. an extremely busy CEO of one of Australia’s largest AFSLs, turning over more than $40,000,000 a year, on a salary package of more than $250,000 a year, and who amongst other things must supervise 50 mostly professional staff, in her long and busy week
  2. somehow learns Katrina, a person Flo has not met before and has no connection with, who lives on the other side of town, is upset to have been quoted $20,000 in fees and commissions by an AMP salesman for what Katrina knows is just a few hours work
  3. somehow obtains Katrina’s number and rings out of the blue to offer an illegal super scam
  4. thereafter, they conspire to create a series of false documents in contradiction of the above three steps, knowing all the time these files will be reviewed by each of Dover’s in-house compliance team and Dover Legal Pty Ltd and, potentially, ASIC and
  5. does all this just so Katrina can get $7,800 of her $40,000 of super a few years early, in serious breach of the law.

ASIC would have you believe Florence would do all this for the princely sum of $280, a fee intended to just cover costs. If ASIC believed Florence was running an illegal early super release scheme why did it not:

  1. report it immediately to the super regulators as a premature release transaction?
  2. work towards enforcing the law, including prosecuting Florence under the criminal law?
  3. at least investigate a little further?
  4. ring Katrina or Florence to find out a little more?

2        Ultimately the client seeks assistance because there are AMP questions she does not understand and that she told AMP she engaged the financial planner as she doesn’t understand all of the options.

The AMP questions that Katrina did not understand related to superannuation. Katrina specifically did not engage Florence to provide advice on super and Florence specifically did not provide advice on it. The emails record Katrina saying she did not understand AMP super. and Florence offering to explain. But Katrina did not take Florence up on this offer.

The adviser informs the client she needs to do an SOA to make sure her file are compliant[4].

This misses the obvious point that a statement of advice (or SOA) was not needed. It was not required because no personal advice was provided.

Florence did not provide “personal advice” to Katrina. It was “execution only” advice. This was made clear from the get-go. Katrina rang Florence and asked if Dover could implement the insurances recommended by the AMP salesman, but not charge commissions. No advice was involved. Florence repeatedly recorded this in e-mails and file notes, and it is carefully prominent in the SOA itself. ASIC has all these documents. But why recognize the obvious if you then must accept the obvious implications?

Florence did not need to provide a SOA to Katrina.. But she did so for completeness and good practice and to ensure compliance in case something went wrong[5]. Florence also provided a Financial Services Guide[6] and Product Disclosure Statement[7].

Florence also provided an SOA so Dover’s commission reconciliation team could reconcile the AMP commission payments to the SOA. This was a key part of Dover’s SOA review process.

3        I am very concerned about this advice. It appears to me that the client is seeking to access super monies without meeting a condition of release and does this through a contrived arrangement with the assistance of the adviser. It is clear from the very early email exchanges and later daily requests that the client is interested in a rebate of the commission that Dover received as a result of this insurance sale. According to the SOA, the premium is $7,156.08 and commission payable is $8,377. The client repeatedly asks how long the rebate will take, how he money will be deposited, whether it will be paid in that day etc.

Before we start the de-construction a question: why did the ASIC experts not ring Florence and tell her they were concerned this was all about “seeking to access super monies without meeting a condition of release”?

It would have saved a lot of time and trouble. But we guess it would not achieve ASIC’s goal.

Katrina did not conspire with Florence to access super monies without meeting a condition of release. That was not her purpose. Katrina’s purpose was to get $800,000 of insurance, to cover her loan and the bank’s requirements, at the lowest possible price, after tax and after commissions. That was her purpose.

To help Katrina do this Florence placed Katrina on the McMasters’ Commission Rebate Scheme[8]. Florence did not accept commissions. All commissions were rebated to clients. It was McMasters’ policy. No exceptions. Dover had the same policy: all commissions were paid in full to the relevant adviser. This meant Dover and McMasters’ was beyond the influence of product manufacturers such as the banks and the AMP[9].

In 2016 McMasters’ refunded about $1,000,000 of commissions to clients around Australia.

Katrina’s insurances were still in place with all premiums paid in full in 2018, ie the third year of the policy’s life. To the best of Dover’s knowledge this is still the case. This refutes ASIC’s statement Katrina’s purpose must be to access her super early.

Katrina’s purpose was to arrange $800,000 of life insurance to cover her loan and meet the bank’s requirements, at the lowest possible price, after tax and after commissions. Florence helped Katrina do this. Basically pro bono. Florence took a few minutes out of a busy day to help someone down on her luck who needed a hand.

Katrina could not afford $20,000 of AMP commissions for just a few hours of simple clerical work. It would have taken Katrina 4 months to earn $20,000, before tax, and more than 4 years to save $20,000 after tax. Florence did Katrina a favour. It as simple as that.

There was no ulterior purpose. There was only altruistic purpose.

4        If the commission rebate is not a major driver of the advice (which the reviewer considers it is), the advice is still problematic. The client only has $32,000 in super and being self-employed there are not necessarily any contributions being made to the fund (although the adviser does not ascertain this). At this rate the client’s super will be exhausted in 4.4 years at which time she will have no insurances and no superannuation. At this rate the client’s super will be exhausted in 4.4 years at which time she will have no insurances and no super.

Florence did not advise Katrina to pay her premiums out of her super fund. The AMP salesman did. Florence simply executed Katrina’s instructions on a no advice basis (and no commission basis). Katrina did not ask for and did not get advice. This was made remarkably clear in Florence’s paper trail[10], including her SOA, which includes this passage:

Risk in this advice

We have not provided any advice on the suitability of the insurances as per your instructions. If you are concerned and require specific advice, please let us know before you proceed.

They should have got it from Florence’s first file note. It read:

For completeness, ASIC’ concern in 4.4 years Katrina will have no insurances and no super (implying that therefore Katrina will be worse off) is not rational. Premiums cost money whether they are paid out of super resources or non-super resources. By paying them out of super resources Katrina:

  1. gets a tax deduction for the amount paid and
  2. gets to preserve her non-super resources for purposes she believes are more important, eg: caring for her parents and paying the interest and principal on her $800,000 loan.

As to ASIC’s concern that Katrina’s $32,000 of super will be gone after 4.4 years:

  1. obviously, due the tax benefit, Katrina’s non-super resources will be greater than otherwise, by a greater amount. Overall Katrina will be better off if she does this (ie when her total assets are considered, no just her super assets)
  2. Katrina can pay future tax-deductible contributions to replenish her super if she chooses
  3. $32,000 is not a significant sum and was never going to sustain Katrina’s retirement anyway. (The main stay of Katrina’s retirement involves her home, the loan on which is her highest priority)
  4. Katrina’s $32,000 of super is trivial and not relevant to her retirement plans. Other strategies like health maintenance and remaining in the workplace for longer than otherwise expected make much more sense (but of course thoughts like this are outside ASIC’s domain. It does not understand real financial planning).

May we add the obvious: Dover would rebate $20,000 to Katrina over the next 10 years. The AMP salesman would not. Katrina’s retirement prospects are better with Dover than with the AMP. By exactly $20,000, plus some tax benefits.

As to ASIC’s concern Katrina will have no insurances in 4 years, this depends on what Katrina does. For example, she could contribute an amount each year to keep the insurance alive.

5        It is likely the she needs income protection cover more (if she indeed intends to take out a $800,000 mortgage, which is questionable), but this has not been explored by the adviser. It is not plausible that the client will obtain an $800,000 mortgage, as she cannot fund this level of debt ($800,000 times 5% = $40,000 in repayments based on her income of $55,703 net of tax).

Dealing with the insurance first, this is correct. It could be that Katrina needs income protection insurance more than life insurance. She could. Two points:

  1. Florence was not asked to advise on income protection insurance. It was an execution only service and Katrina only asked Flo to implement the life insurance cover. Katrina made it extremely clear she did not want advice on anything else and
  2. the bank required Katrina to have $800,000 life insurance to cover the $800,000 loan she needed to buy her parents’ home. That is the only reason she wanted the life insurance. The bank did not require income protection insurance.

(ASIC also does not understand for a low-income-older-female income protection insurance premiums are incredibly expensive. This is because most of the sum insured displaces social welfare entitlements. (ie why insure 75% of $50,000 a year if social welfare pays $25,000 a year: the net benefit is only $12,500.)

Offensive behaviour by ASIC

It is extremely offensive to read the ASIC executives say Flo lied about Katrina taking out a $800,000 loan. There is no basis for their statement. It is obviously intended to cast doubt over Florence’s character and reputation. It deserves an apology.

A simple question: if ASIC doubted Katrina intended to take out a $800,000 mortgage, why did ASIC not ask Katrina to prove the loan? Why not just ring? ASIC had every opportunity to clear this one up but it chose not to. Why?

Another simple question: why would Katrina pay large insurance premiums if there is a premium claw back if her second year or third year premium is not paid? Florence cautioned her in writing claw back rules applied. If Katrina failed to pay the premiums she would have to refund the commission rebate.

This was not a “get your super early” scam. It was genuine insurance arrangement and it benefited Katrina.

Again, why did ASIC not just pick up the phone?

6        The SOA was not approved before providing it to the client, despite the SOA saying it had been approved by Dover Legal. SOA stated “Dover Legal Pty Ltd is an Australian Legal Practitioner. Dover Legal Pty Ltd has reviewed this statement of advice including the materials in Dover’s Client Protection Policy and has confirmed that it is in your best interests and is appropriate to your circumstances. A copy of an e-mail to me from Dover Legal Pty Ltd confirming this is available on request.”

It beggars belief ASIC simply asserts without evidence Dover Legal did not review the SOA, casting serious character aspersions on Dover, Florence and Dover Legal, with no investigation at all: Dover Legal was never asked if it had reviewed the SOA.

How can ASIC assert something never happened? It impossible to prove a negative.

One can prove a positive: here is the e-mail confirming Dover Legal reviewed the SOA:


A twist in the tale

In one of life’s strange twists Sharlini Dias left Dover a few months later. Sharlini is now a solicitor in ASIC’s Melbourne office.


[1] Mr Hayne, the second most famous Kenny in Australia, is pictured rudely jabbing his finger at Mr Neil Young QC, who coincidentally attended the same secondary school as Terry McMaster, which was philosophically about as far away from Mr Hayne’s sheltered life at elite Scotch College as one can get (but at least their school did not have a culturally entrenched bastardization problem).

[2] It worked. Flo has not worked since ASIC forced Dover to close. ASIC’s name and shame strategy is effective. Google works.

[3] Yes, I know. The ASIC experts’ grammar is atrocious. It always is.

[4] Once again, yes we know. The ASIC experts’ grammar is atrocious. Their work was obviously not proof-read or otherwise checked before it was provided to the Royal Commission in early December 2017

[5] Dover’s policy was to prepare a SOA, even if one thought a SOA was not required. There is no penalty for preparing a SOA where one is not required. There is a penalty for not preparing a SOA where one is required. Therefore, to play it safe and to eliminate the risk of not providing a SOA where one was required, Dover required advisers to prepare a SOA even if it was an “execution only” transaction, ie one not involving advice.

[6] RG 175

[7] RG 175

[8] Known as Big Refunds from about mid-2016 on

[9] No other large AFSL had this policy

[10] Florence even over-stresses this point, from her first file note on. Katrina did not want any advice. The SOA uses templated references to advice. But on a helicopter view the overall message of “no advice” is clear.

The Dover Group