Terry McMaster

The shutdown of Dover Financial — which the Australian Securities and Investments Commission (ASIC) would eventually have done but was pre-empted by managing director Terry McMaster (he of the collapse in the witness box at the royal commission) — has been a long time coming.

McMaster was being questioned about Dover’s “Orwellian” client protection policy, which was actually about protecting Dover Financial by cutting adrift any advisers who failed to research products properly, when he collapsed at the royal commission. But he’d also come under fire for threatening complainants with defamation suits and Dover’s willingness to take on financial advisers who had previously engaged in misconduct with other licensees.

On that score, the matters before the royal commission were hardly new. Back in 2009, McMaster defended hiring planners involved with the Storm Financial collapse. “As long as they don’t breach the Corporations Law, they can stay reps. That’s the way our model works,” McMaster declared about planners who were later banned even by the watchpoodle ASIC. It came as no surprise that years later, Dover happily employed one Adam Palmer, who had left AMP after being audited and found, not for the first time, to have provided poor or conflicted advice.

What ASIC was doing in the intervening years about the apparently endless recycling of poor financial planners around the industry is anyone’s guess. Evidently not a lot between 2019 and 2017.

Such is the bizarre structure of the financial planning industry that the closure of McMaster’s firm has left several hundred financial advisers unlicensed and unable to operate until they can move to another licensee. Imagine a hospital shutting down, leaving all the doctors unable to work and uninsured. The sooner the industry actually gets serious and embraces full professionalisation and individual licensing and professional indemnity insurance, the sooner it will start losing its reputation as a haven of shonks and spivs. 

The only serious regulatory alternative currently around is regulation by “too big to fail” — somehow ensuring the big banks and AMP remain vertically integrated (and thus conflicted) in the financial advice and wealth management businesses, meaning big players with deep and very sue-able pockets will be responsible for providing much of the financial advice given to Australians. Most of the big banks themselves have worked out that the reputational damage of this approach is too great and are bailing out. There’s no easy fix, especially when ASIC lacks the capacity or willingness to aggressively protect consumers.