Before you go, let's talk about compliance

2017 saw increased focus on gatekeepers, 'one size fits all' advice models and the quality of Licensees' oversight. The results were not pretty. Now is the perfect time for Licensees to review their monitoring and supervision arrangements to ensure that they more effectively protect clients' interests, manage  risks and satisfy ASIC's legitimate expectations. This article addresses these issues and lists some key points to consider.

Read More
"Nobody said it was easy. No one ever said it would be this hard": Understanding MDA, SMA and IMA

The search for better investment choices has seen traditional model portfolios of managed funds and equities being abandoned in favour of managed account solutions that offer increased flexibility, greater efficiencies, direct ownership and often lower costs. The true level of their appeal is impossible to determine, but the growth of Managed Discretionary Accounts (MDA), Separately Managed Accounts (SMA) and Individually Managed Accounts (IMA) is inarguable.

Read More
Welcome to Bizarro World: Proving Best Interests

The best interests duty ambitiously requires the provider to "act in the best interests of the client in relation to the advice". The 'safe harbour' steps, are a statutory framework that is a partial, and not terribly effective, defence against apparent failures to act in a client's best interests. Unfortunately, an increasing number of Licensees appear to use the 'safe harbour' steps both to prove the provider's compliance with their best interest duty and to establish the quality of the advice provided. Welcome to Bizarro World. 

Read More
"We don't need no education": Reflections on competency, training and education

The popular view of acceptable 'training and education' for financial advice professionals seems to increase with each new licensee failure and public scandal. 

While most advisers admit the initial base was quite low,  expectations have increased dramatically. Now, with new education standards looming on the horizon, the landscape of financial advice looks to change forever.

This is a great outcome for the emerging advice profession.

Read More
"Hurry Up and Wait": Cost, complexity and service standards

ASIC's industry funding model commenced on 1 July 2017. Designed to ensure that those who create the need for, and benefit from, increased regulation (and increased regulatory attention) bear the costs of these benefits, it proposes that the costs of ASIC’s activities will be recovered through a combination of "ongoing levies on regulated entities and individual fees for user-initiated regulatory functions (such as licence applications)." The "fees for user-initiated regulatory functions", and ASIC's new Service Charter, are the subjects of this article.

Read More
"What the hell am I doing here?": Goals, objectives and great advice

Your client’s goals and objectives are the foundation on which personal advice is built. Unfortunately, they are too often confused, used incorrectly or relegated in importance behind a client’s risk profile.  In other cases, they’re reduced to generic and undifferentiated statements that lack detail and the reflect the planner’s recollection rather than the client’s relevant personal circumstances. Practically, the most powerful statement of your clients’ goals and objectives are the ones that come from the clients and are recorded in as close to their own words as possible. After all, isn’t the fundamental purpose of personal advice to deliver what the client needs and wants? 

Read More
AFCA: Old wine in a new bottle?

The central plank of the Treasury Laws Amendment (Putting Consumers First – Establishment of the Australian Financial Complaints Authority) Bill 2017 (‘the AFCA Bill’) is the establishment of a single not-for-profit external dispute resolution (EDR) body with a broad jurisdiction. This new super-EDR will hear complaints against financial institutions including Australian Financial Services Licensees, credit providers and credit representatives, superannuation funds (other than self-managed superannuation funds), approved deposit funds, life insurers and general insurers. The ABA thinks it's a great idea but I have some reservations. 

Read More
Don't look back in anger: Insights from a former adviser

In reality, financial planners and compliance reviewers have more in common than they realise; both understand the value of advice and both are committed to building an advice profession. I know this to be true because I've done both roles. Here are the lessons I learnt when transitioning from financial advice to regulatory advice and compliance. I know we don’t enjoy having our work turned inside out by a stranger at the best of times, and while this may never change, maybe the experience itself can. So don't look back in anger.

Read More
Is your Licensee your greatest risk?

Advisers join Licensees for a variety of reasons - price, convenience, shared values and history - but underlying all these is the presumption that the advantages of joining a Licensee outweigh the disadvantages. What if that presumption is wrong? What if your Licensee's conduct is a far greater source of compliance risk to you then your own conduct? This article explores the risks implicit in the Licensee and proposes some practical ways to mitigate those risks.

Read More
Robots, regulation and redundancies.

Digital advice is the topic du jour for licensees facing rising costs, shrinking margins and a war for talent but it's not a plug and play solution. Despite the appeal of fintech, they'll still face heightened scrutiny, compliance hurdles and distribution challenges. If you're just dipping your toe into the water, this report from Planet of Finance is an excellent place to start. 

Read More
Business tips from fraudsters

Despite the inevitable march of consumer technology, I've noticed that many financial advisers still underestimate the role their website plays in reassuring prospects and establishing both credibility and legitimacy. If you're convinced that a compelling digital presence will have little, if any impact, on the growth and success of your business, then enjoy the commercial irrelevancy you've voluntarily embraced. This article examines consumer preferences, social proof and offers five tips to improve advisers' websites. 

Read More
The risks of risk profiling

Risk profiling is a foundation element of most financial planning processes but explaining to a client the consequences of their risk assessment is much more critical than the assessment process itself. In fact, we believe this discussion is crucial to securing a client’s informed consent. Whatever assessment process you follow to determine their 'risk profile', you should assess embrace context, test your assumptions and confirm your clients’ preparedness to lose capital and sacrifice potential income. This article explains why.

Read More
Trust, Culture and Enforcement

On 12 September 2017, ASIC Chairman Greg Medcraft presented at the Thomson Reuters Newsmaker event and articulated his view that ASIC is primarily an enforcement body responsible for promoting investor trust and confidence in financial services. With reference to the ongoing actions involving Commonwealth Bank, NAB and a range of smaller licensees, the Chairman discussed ASIC's priorities and addressed a variety of topics including trust, reputation and culture. This article explores the reasons, consequences and implications of those views. 

Read More
CHANGE: Crowd-sourcing - Hurry up and wait

From 29 September 2017, ASIC will accept applications from intermediaries seeking an Australian Financial Services Licence authorisation to provide a crowd-funding service. In order to better manage the commercial and competitive pressures, ASIC intend to coordinate the applications to ensure the process is fair and equitable. If you intend to seek this authorisation make sure you understand the requirements and the key dates.

Read More
ToolsSean GrahamComment
REPORT: "Are profit based incentives compatible with a risk culture?"

The August 2017 Experimental Research report titled "Are profit-based incentives compatible with a risk culture?" should be required reading for compliance professionals. The Macquarie University/FINSIA publication reinforces observations made about both Wells Fargo and Commonwealth Bank, and makes some interesting observations about culture, attitude and the impact of incentives. 

Read More
ToolsSean GrahamComment