Learn the warning signs of an untrustworthy advisor
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Whilst Australian borders and businesses slowly begin to re-open, the impact of the COVID-19 pandemic will continue for some time yet. For businesses, particularly small to medium enterprises (SMEs), it is crucial to obtain the right advice and use existing protections as you navigate the ever-evolving economic landscape.
The Australian Financial Security Authority (AFSA) is concerned that vulnerable SMEs may fall prey to unscrupulous and untrustworthy advisors. Such advisors could give you misleading or illegal advice that has serious consequences, including convictions.
Tell-tale signs of an untrustworthy advisor
These signs may signal that something is amiss:
- Creating an unnecessary sense of urgency to hinder critical thinking and sound decision making.
- Funnelling all communications through them and trying to cut everyone else, including you. They may also list their email address for your business as well as creditors.
- Misusing the Personal Property Securities Register (PPSR) and making false registrations. You can check the PPSR at any time by undertaking a search or you could register a security interest.
- Recording a high number of ‘friendly’ creditors as unsecured debts.
- Downplaying the risks of any activity and overstating the returns.
- Using unnecessary jargon and failing to explain their proposals fully and clearly.
- Implying that they are well connected or work with reputable people but do not have actual references to contact.
- A lack of supporting documents or evidence for activities undertaken or proposals for future work.
Don’t be caught off guard; learn how to identify signs of dodgy advice. Remember, if it sounds too good to be true, it probably is.
What is AFSA doing about untrustworthy advisors?
AFSA has zero tolerance for untrustworthy advisors – people who provide false or misleading information about the PPSR and insolvency options, taking advantage of vulnerable businesses and disadvantaging creditors.
AFSA use their legislated powers to disrupt the activity of untrustworthy advisors, including:
- Disrupting and investigating suspicious advice activity.
- Putting pressure on insolvency and financial practitioners who engage with untrustworthy advisors. Working with an untrustworthy advisor, even unwittingly, will attract AFSA’s attention and lead to ongoing scrutiny.
- Actively engaging with other regulators and law enforcement agencies to disrupt bad behaviour and refer suspicious cases.
How to get help
There are a number of services available that provide free trustworthy financial information. These include the AFSA website, National Debt Helpline, and ASIC’s Moneysmart website. If you are struggling financially, AFSA offer a wealth of resources about managing your finances and understanding insolvency options, including tools, case studies and details of other support services. Find out more on the AFSA website.
Play your part
Untrustworthy advisors provide illegal advice that can ruin businesses. To protect you and your business, make sure you can spot the warning signs of untrustworthy advisors and take action to shut down those who seek to profit from intentionally misleading SMEs.
Report any concerns about potential untrustworthy behaviour or suspicious activities to ASFA via the online tip off service.
Encourage best practice in your own firm by engaging with your relevant industry professional bodies that provide professional training and uphold strong ethical standards.