Compliance Basics: Ask before you authorise

Smarter Compliance. You may be aware, and the Royal Commission confirmed, that some Institutional Licensees appointed advisers that a prudent Licensee might not have appointed. The difficulty, we were told, was the lack of an agreed process for reference checking. Until the ABA launched their process in 2018, Licensees had no guidance to follow. Unfortunately, HB 322-2007 “Reference Checking in the Financial Services Industry” was published in 2006-7 and endorsed by ASIC and the relevant Associations at that time. This post doesn’t dwell on the credibility of some licensees failures to adopt industry standards but instead offers three resources that might help those licensees committed to acting efficiently, honestly and fairly.

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You're right, "Compliance" is (still) the problem

Smarter Compliance. As easy as it has been to highlight the ignorance and arrogance of some advice ‘leaders’, the reality is that their failings may have been exacerbated by compliance functions that were impotent, ignorant or lacking in courage. In fact, ASIC might add ‘compromised’ as a defining feature of some of these compliance functions. The sad truth is that ASIC was not alone in its criticism of compliance functions; both APRA and the Banking Royal Commission have echoed similar concerns and highlighted a need for the transformation of ‘compliance’. This article considers how burgeoning expectations about competency, capability and courage should apply to your compliance function.

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Bridging the Gap: Best Interests and formal compliance

Smarter compliance. Best Interests. Safe Harbours. Client Priority. All the drama with the Royal Commission has distracted attention from the only issue that really matters - To what extent are advisers acting in their clients’ best interests. The short answer from us is that the best advisers have never wavered from their ethical and professional commitment to act objectively in the interests of their clients. For these advice professionals, the best interest duty, simply reconfirmed their approach to advice, service and care. This might not be the case for all advisers. This article explores these issues with reference to both the #BankingRC Final report and Hub24’s excellent 2019 report “The Adviser’s Best Interests Duty: Creating Better Advice.”

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Insurance within SMSF: Five key considerations

Smarter compliance. In a previous newsletter, we addressed five common errors  in Self-managed Super Fund advice. We also included some frightening statistics surrounding the level of trustee knowledge, and the adviser’s role in the advice process. In this article, a former adviser draws on his experience to nominate five critical considerations (and accompanying ballads) that deserve closer consideration.

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The lure of technology: Limits, practices and reality.

Smarter compliance. For those of us interested in the future of advice (and the far smaller number of us interested in compliance), technology - and, specifically, in regulatory technology (“reg-tech) - is particularly appealing. Well-designed solutions, customised and properly supported, can make advisers and licensees both more efficient and more effective. Better yet, the proper technology can be a source of competitive advantage in a highly regulated industry. This article looks at alternative views, offers seven questions to consider and reminds us that, if we make the wrong calls, technology can be “a good servant but a bad master”

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Change or be changed: The challenge for advice

Smarter Compliance. This year will be a challenging and momentous year. Change may be inevitable and irresistible, but it needn’t be fatal. The better licensees and advisers have already separated themselves from the pack and started to transform themselves to succeed in the new environment. This article explores what they’re doing and how they’re doing it. Don’t be left behind.

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Getting to the right place: Research and Approved Product Lists

Smarter Compliance. The business of financial advice is hard. In addition to a range of legal and professional obligations, the complexity of individuals’ specific needs and the challenge of regulatory arbitrage, Licensees and Advisers are expected to be well-informed about an ever increasing number of financial products and platforms. Consistently providing appropriate financial product advice is an insurmountable challenge unless the Licensee has an effective research process and a well constructed APL. In this article, we answer a user’s questions on the role and use of the APL.

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"It's the end of the world as we know it": Three reasons to celebrate

Smarter Compliance. 2018 might have been an embarrassing, dramatic and traumatic year for the financial services industry (and the Commission’s Final Report is yet to come) but Compliance Professionals have had enough ‘gloom and doom’ for the moment. As 2019 lurches forward, we identify three ways that 2019 could be a very good year for compliance staff. Sure, you’ll still be over-worked and misunderstood but you may also start to be appreciated and valued. Work smart, seize these opportunities and you’ll transform your role and increase your influence. Good luck.

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Why most SMSF advice sucks: Five common errors

Smarter Compliance. Since their introduction in 1999, the popularity of the SMSF has remained relatively constant despite the ups and downs experienced within the share market, housing market and industry. We review a lot of advice. While our experience with SMSF doesn’t entirely accord with ASIC’s view that 90% of SMSF advice is ‘poor’, we have noticed some common issues in the advice we have reviewed. This article discusses five elements you need to address to ensure that your SMSF advice doesn’t “suck”.

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What a Year. A summary of achievements and refinements.

Smarter Compliance. Happy New Year. 2018 was a challenging year for many Licensees but, for all its tension and drama, it highlighted problems that openAFSL solves and introduced new issues that we had anticipated. While others were caught flat-footed, our reg-tech platform quietly deployed the solution they needed. There’s still time for you and we’re happy to help. Call or email us to learn how OpenAFSL can ensure that you act “efficiently, honestly and fairly” in 2019.

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An argument for unification: why risk and compliance should be joined

Smarter Compliance. For all their obvious similarities, Compliance and Risk Management are two management disciplines demarcated, fundamentally, by arbitrary distinctions, assumptions and biases. As appealing as the status quo may be to existing players, the Banking Royal Commission has highlighted the desperate need for licensees to take compliance and risk management seriously and build effective and efficient functions. The best approach might be to combine them . This article examines the obstacles in the way of a building an effective CGRM function and the reasons to do so quickly.

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Head to Head: The MDA Guru on 2018

Smarter Compliance. Peter Turbach from MDA Guru believes that, as a result of FOFA, ASIC Regulatory Guide 179 (RG 179) and the Royal Commission, financial advisers, investment managers and MDA providers are struggling to identify how to identify the path forward in the face of regulatory ambiguity, legislative equivocation and uncertainty. In this article, Peter answers our questions and offers some thoughts and advice to advisers dealing with MDA and SMA.

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"Don't let me be misunderstood": Conflicts, professionalism and advice

Smarter Compliance. In previous articles we've addressed the limitations of disclosure, RG181, s961J and the seemingly inevitable tendency for advice businesses to subordinate their clients' interests to their own. Conflicts exist in all commercial enterprises but the challenge for businesses providing financial advice is the effective and efficient management of these conflicts. The question seldom asked is whether these conflicts can ever be effectively and efficiently managed. This article introduces relevant research, including the research paper submitted to the Royal Commission by Professor Sunita Sah.

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Reasonable Steps: Licensee obligations and regulatory risk management

Smarter compliance. Section 912A(1)(a) of the Corporations Act requires a financial services licensee to “do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly”. As we’ve seen from the Banking Royal Commission, this is neither verbiage nor aspirational sentiment but a compendious expectation that requires consistent and demonstrable competence, capability, efficiency and integrity. It’s also an obligation that the law expects to apply equally to the Licensee and their representatives. This article moves from the specific case of ASIC v Financial Circle to the reasonable compliance arrangements expected of licensees.

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The examined life: FASEA, facts and the future of advice

Smarter Compliance. We are now on the eve of the implementation of the Corporations Amendment (Professional Standards of Financial Advisers) Act. FASEA and this legislation will significantly change the training, education and ethical standards for financial advisers and reshape the advice profession. This article explores the significance of the proposed change in education standards, maps out the practical differences and draws on similar examples to highlight the facts that advisers will need assured support to weather these changes.

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The Great Divide: RG146, training and education

Smarter Compliance. In this guest post, education expert, Angelique Aksenoff, introduces the great divide in competency standards and asks “what will happen to RG 146 and Tier 2 advisers with the uplift to financial adviser education and training standards?”. Identifying that shifting Tier 2 standards will have a far more profound impact than many anticipate, the author explores the challenges and likely consequences of these essential reforms.

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Advice, file-notes and adverse inferences

Despite the emphasis on regulated documents, and the increasing use of technology, advice has an oral foundation. Unfortunately, memory is imperfect. In reality, a failure to appropriately document client conversations, answers or agreements can challenge your credibility and expose you to additional risk. Poor file-noting may not be fatal for you, but in the event of a claim or dispute, courts may draw adverse inferences from scant or non-existent file-notes. This article addresses these risks and suggests ways you can avoid undercutting your professionalism or prejudicing your defence.

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September Update: Connections, Conduct and Coding

Smarter compliance. We live in interesting times. While many participants are intimidated by the Royal Commission and ASIC’s Report 594, we just kept coding to ensure that OpenAFSL continues to deliver on its promise. We crushed it in September. The full list of tweaks, enhancements and innovations would overwhelm you but, in this article, we’ll cover some of the main ones.

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