Chapter 4 – ASIC Example 1: Dover’s new adviser appointment processes


ASIC’s findings on Dover’s processes for appointing new adviser are brief:

Example 1 – Appointment processes is chosen is a cherry-picked abnormality intended to mislead and misinform the reader. The bankrupt adviser was extremely up-front about his bankruptcy. It was taxed based, not fraud based. It was one of those things that can happen to anyone. Dover decided to help. A non-bankrupt professional helping a bankrupt professional is not an unusual event. We can think off hand of dozens of doctors, dentists, accountants and lawyers who worked through a bankruptcy with a little help from friends.

Dover’s faith and judgement was repaid. He proved to be a model adviser.

ASIC’s observation that 100% of the 7 appointment cases[1] did not include each of the discretionary steps process is exactly what one would expect. That’s why they are discretionary steps and not mandatory steps…. Dover exercised its discretion.

New adviser completion rate

In 2017 Dover measured its new adviser applicant completion rate. It was about 20%. Most applicants dropped out when Dover’s onerous compliance processes were explained. Dover was happy about this: Dover did not want these advisers. It only wanted compliant advisers.

Dover used reference checks for new advisers. The Royal Commission confirmed this. But Dover preferred non-AFSL reference checks because institutional AFSLs either did not provide a reference check or provided a bad reference. There is also the obvious problem of checking a reference before an adviser advises the old AFSL they are leaving.

Dover found the most useful and objective adviser references were provided by the insurers.

ASIC’s requirements for new advisers: Report 362

ASIC’s best practice is set out at paragraph 86 of Report 362: Review of financial advice industry practice: Phase 2 where at paragraph 86 ASIC states:

Dover exceeded ASIC’s requirements Report 362

Dover exceeded these requirements. Dover checked every SOA for every adviser. That is, Dover used “additional controls” ie the triple checking of every SOA to ensure this adviser’s work was competent. This additional control worked.

Integrity Compliance also found Dover’s on-boarding processes to be satisfactory. They reviewed Dover’s processes in 2017 after ASIC advised Dover of its three audit concerns.[2])

[1] A sample of less than 1% over the relevant period, based on five-year old applications. It’s reasonable to assume it was a cherry-picked sample not a random sample

[2] This is discussed in detail in chapter 17 “ASIC’s in-house solicitors set Dover and Terry up at the Royal Commission

The Dover Group