After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.

This week, UK TV personality Piers Morgan said that Ricky Gervais had delivered a ‘Glorious Kick in the Globes’ to the Tinsel Town, ego-driven celebs with his Golden Globes opening speech, and now FASEA have done the exact same thing to every Australian Financial Planner.

Actually, they have punched them in the head first and then followed up with a kick straight to the Globes, as from the 1st of January new rules have to be adhered to.

In typical Australian utopia tradition, setting up an organisation with a long acronym makes everything seem super offical and FASEA is the industry body that has introduced them.

FASEA, as we all well know, stands for ‘Financial Adviser Standards and Ethics Authority’ and was set up in 2017.

Before these new rules, a financial planner (or stockbroker) could place their clients in two baskets. One named “Wholesale” and one named “Retail”.

The “Wholesale” clients are deemed by FASEA as “competent” at financial matters.

And at risk of upsetting the remaining 11 million “Retail” clients in Australia, your correspondent can only presume that FASEA must therefore deem the other basket “incompetent” at financial matters.

Their words not mine. It was however before the new rules totally black and white.

To be allowed to boast to your family and friends that they were in the presence of a ‘competent investor’, they needed a special form from their accountant.

The form, known as a ‘708’, is an official document that states you have assets of $2.5m and/or had earnt over $250,000 per year over the last two years.

If you earnt only $249,000 or had a mortgage free house worth $2.49m, then you were deemed to be not financially competent.

As the average MP only earns $211,250 a year, they are therefore deemed financially incompetent, which is something you may wish to point out the next time they try and shake your hand Scomo style.

Dealing with a competent just needs a tick on their paperwork, but dealing with an incompetent meant a whole lot more paperwork, including written justification on why their advice was given. So more work needed for the exact same commission payment.

So you can see which basket the planners wanted their clients in.

However, the new rules now state that even though a client may on paper qualify as competent to understand your advice, you now have to also justify it, including stating any conflicts of interests that arise.

That was the punch to the head.

The kick to the Golden Globes is all to do with the commission. During the Haynes enquiry, what everyone in the industry already knew was going on became exposed to the public and that, in most of the cases they examined, commission came before duty of care.

This has now changed to a fee for services, with most commissions previously paid having to be credited back to their client.

Oh and something that must really hurt the advisors, the client must be alive and not dead to charge commissions. How dare they take this right away!


A ripping yarn

FASEA have very kindly put together a handy 40 page explainer on how these new rules come into play and in typical government style, their example explanation on page 11, written with all the charm of a Readers Digest marketing letter, is pure bureaucracy gold.

It’s a ripping yarn worthy of a Jeffrey Archer novel. Set in Bondi it involves “Wallace” the financial planner, “Donna“ the “incompetent” but untrusting wife, “Dale” the betrayed husband and the mystery cousin who’s sudden death throws the whole previously cosy relationship into a tailspin.

The story explains how Wallace, by giving advice to an “incompetent women” (who lives in a $3.4m Bondi home which was obviously provided entirely by the husband), manages to breach the new rules by recommending Donna buys $20,000 worth of shares in a company intriguingly called VubberLife.

The whole investment unravels when VubberLife shares fall a whopping 25 per cent after an unwanted public enquiry into their business. Who or what VubberLife actually do is never made clear, but that’s beside the point.

Upset with her $5,000 loss and the prospect of having to fly business class on her next golf trip or god forbid explain her poor financial decision to her unsuspecting husband, Donna complains to Wallaces’ licensee.

And in the end this tale of wealth, mistrust and death on Sydney’s Eastern suburbs comes to a sad culmination with Wallace found in breach of his duties because he failed to tick the right boxes on a form. Oh the calamity.

How those ticked boxes would of prevented VubberLife being subject to a public enquiry or somehow made Wallace aware of the pending financial disaster about to unfold is also unclear.

What a story. It’s the kind of sorry affair that makes The Secret Broker happy he hung up his order pad long ago.

One can only presume the whole episode was actually written by an AI super computer sitting in an office block in Canberra, unless of course anyone can actually find someone named Donna, Dale or Wallace living in Bondi.


The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].

Feel free to contact him with your best stock tips and ideas.