“Efficiency is doing things right; effectiveness is doing the right things.”
— Peter Drucker
Compliance provides freedom
It’s easy to understand why compliance has become synonymous with bureaucracy, restraint and frustration.
As Commissioner Hayne recognised, “there are so many wires .. strung between the fence posts” that it’s easy to lose sight of the simple principle that is at the heart of the financial services ecosystem; comply with the law.
Beyond operating efficiently, honestly and fairly, a Licensee must ensure that its authorised representatives comply with financial services laws.
We can quibble over qualifiers, and rationalise their arrangements by reference to the nature, scale and complexity of their business, but their obligation is clear. How they satisfy their obligations – and the measures, processes and procedures they choose to adopt and promote – is a matter for them.
Your obligation, as their representative, is to understand their expectations and embrace their approach.
You may consider this to be onerous and restrictive, and it can be when it’s poorly understood, but, in reality, the law is surprisingly flexible.
In fact, the law may be far more flexible than you and your Licensee believe.
Process: almost enough (but not quite)
“allowing advisers to adopt a ‘tick a box’ approach to compliance… has the potential to undermine the broader obligation for advisers to act in the best interests of their clients.”
— Commissioner Kenneth Hayne
Process is important, but to be clear, process is not everything.
In previous articles we’ve observed that considered processes, consistently followed, is often what separates good advisers from most advisers. But a key element of the good adviser’s approach is that the process itself is frequently reviewed and tested to assess their effectiveness and the outcomes they influence.
Process can be the foundation or platform you can rely on, to provide you with form, flexibility and freedom, but every client situation (despite their similarities) is different. Processes, unthinkingly followed, not only frustrate your pursuit of quality, but sabotage your efforts.
Similar client needs can be, and often are, addressed in significantly different ways (even between advisers in the same practice). This is good – we want this! After all, personal advice should be personalised and should involve the active consideration of differences and options. Where process fails (and the advice suffers), is when varying client circumstances are consistently addressed by the same strategies and products.
As reassuring as ‘Box-ticking’ might be to the risk averse, the reality is that process is an ineffective substitute for professionalism.
Your best interest duty cannot, despite what you’re told, be reduced to a process map. It requires you to exercise judgment, show empathy, provide care and consciously apply your knowledge, skill and experience to your client’s specific needs and circumstances.
It may seem a little confusing but it doesn’t need to be. The FASEA Code of Ethics arrived earlier this year and whilst some may feel that this is an extra layer to an already confusing landscape, we’d like you to view it as an opportunity.
An opportunity to move beyond the obvious limitations of disclosure to focus on understanding and engagement.
An opportunity to humanise your processes and move beyond ‘tick-box’ compliance.
“I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times”
— Bruce Lee
At the risk of appearing inconsistent, a rock-solid process provides flexibility and freedom.
When the hygiene factors are taken care of, it frees you to apply your expertise.
If the variables are limited, there should be more time available and there should also be less concern that something may be missed.
The greatest failing of many advisers is their tendency to focus on processes and ignore the reason for them.
Your processes should assist you to arrive at the right result for your client, they should not determine the result.
The trick, if there is one, is to factor your intent and desired outcome into your process design.
In reality, advisers’ processes can vary substantially, even if they are in the same business or authorised under the same Licensee.
In many respects, this should be the case.
While your processes will be built on the same foundation as your peers, your specific approach should be tailored.
The better advisers we’ve reviewed, humanise the industrialised advice process and follow it consistently.
To be clear, their advice is neither templated nor generic, but the processes they consistently use, lead to consistent results.
Unfortunately, our data suggests that many advisers find it difficult to reconcile consistency, efficiency and quality but it is not impossible.
Those that do, also manage their risks far more successfully than their peers.
So, if you’re a slave of your processes, what can you do about it?
Well, the simplest way to reconcile process and professionalism can be addressed by revisiting the ‘big-ticket’ items and fundamentals which are relied upon:
- Only using documents, strategies, products and service providers which have been approved by the Licensee;
- Operating within the parameters of your Licensee’s authorisation;
- Effectively managing and avoiding conflicts of interest;
- Embedding and promoting the FASEA Code of Ethics; and
- Asking for help when needed.
In addition to the above, we’d also suggest an in-depth look at the practices followed when providing advice. Asking some confronting questions may help you determine whether the processes themselves are flawed, or whether they just need some refining.
Consideration should be given as to whether you are:
- Creating fail-safe measures to ensure the non-negotiable elements are adhered to via client meeting packs;
- Adequately recording and actively considering the client’s circumstances, objectives and preferences;
- Recording client discussions in detail and focusing on the relevant information, client perspective and engagement level;
- Prematurely determining strategies or selecting products;
- Basing decisions on the client circumstances, or business efficiencies;
- Adequately assessing existing products;
- Giving alternate strategies their rightful place and documenting these to support the advice (not justify);
- Following your Licensee’s direction; and
- Asking for assistance when needed.
You’ll only be consistently successful when the laws, norms and expectations become embedded and habitual; You’ll be spectacularly successful when you’re confident enough to consciously move beyond habitual conduct and respond to your client’s specific circumstances and interactions.
Incidentally, when was the last time that you purposely reviewed your processes?