“UTTR – acronym meaning “up and to the right”, like a graphed-up trend of growth.”
— Derek Parker, “Top business buzzwords of 2019”
Onward, ever upward
We’ve previously observed that, despite increased (and increasing) regulatory and stakeholder expectations, many advisers simply matured or evolved to prosper in the new regulatory regime.
We weren’t just offering anecdotal observations to mollify complaints, the data shows that, despite increasing compliance obligations, the quality of advice in 2021 is materially better than 2020. I’ll go further, and suggest that those businesses with whom we’ve been working over time, have outstripped the mean and consistently outperform their peers.
I appreciate that assessing ‘advice quality’ is triggering for many advisers, but it’s not purely a subjective assessment; advice quality is direct consequence of advice processes that meet, and exceed, legal requirements.
Your Licensee’s approach to monitoring and supervision is the single most important contributor to the quality of your advice.
You know that what gets measured, gets managed so, it shouldn’t surprise you to learn that Licensees that consider the “audit” as a control mechanism, get the outcomes and culture that reflects their limitations. On the other hand, those that approach it as a means to educate, empower and equip advisers to do better, see immediate and lasting benefits.
They are not only better at managing their legal and regulatory risks, but improving their clients’ (and their advisers’) experience by investing in the sustainability of their businesses. Coincidentally, they are also more consistently profitable.
We’re compliance nerds, so our focus has always been on equipping our clients to optimise their existing compliance obligations, anticipating change and ‘future proofing’ their businesses. What’s reassuring, is that this focus is delivering real and measurable benefits.
Data + Insight
We have, at last count, reviewed over 13,500 client files using a consistent, qualitative and risk-based advice assurance process.
Although our clients benefit from our insight, we thought that now is an appropriate time to share what we see – what compliance issues commonly appear and how they can be recognised.
Clearly, we’re much more granular (and capable of providing more specificity) but here’s our view of advice in 2020. We’ve tried to simplify the data but, the larger the sector, the greater the number of issues identified.
What might surprise you is while “advice process” issues represent over 20% of identified compliance issues, it’s qualitative elements (and adviser’s success in operationalising compliance obligations) that simply don’t accord with an industry that prioritises relationships and understanding over process.
These results vary according to the Licensee, State, experience and advice focus (as well as subject and scope).
You’re unlikely to be surprised that compliance with aspects of the FASEA Code was the number one issue in 2020.
What may be even more surprising for some is that, despite the aspirational requirements, the contraventions of the Code did not correlate with significant compliance failures – whether failures to act in best interests, to provide appropriate advice or prioritise clients’ interests. In this respect, at least, advisers have soundly demonstrated a level of professional conduct that might surprise some commentators. Clearly, there is still some progress to be made but the results are impressive given how little effort some businesses did to operationalise the FASEA Code.
So, was 2021 any different?
I know what you’re thinking, nothing’s changed, but here’s why you’re wrong.
The FASEA Code remains troublesome for some advisers but, for many of those recently ejected from Institutional-licensees, their 2021 review was the first time the Code had even been considered. And, even so, we saw less issues in 2021 than 2020.
Second, “best interest” failures were one of the top ten issues in 2020, but these failures didn’t make the Top 10 in 2021.
In fact, the 2021 reviews clearly identified that, while advisers routinely act in their clients’ best interests, they poorly document (or validate) their efforts.
Thirdly, the majority of the remaining issues are “near misses” rather than complete failures; they are not ignorant of their obligations and duties, but simply require the tools and training to better manage them.
Context, Analytics and Reporting
“We know .. from … our onsite supervisory work … [that] metrics tell a powerful story. ”
— Regulation for recovery: when pilots become enduring practice A speech by Deputy Chair Karen Chester, to the AFR Business Summit 2021, Wednesday 10 March 2021.
We don’t promote OpenAFSL as much as we should (given the clear benefits it provides) but the data we’ve presented above highlights that, unlike the mechanistic process routinely followed by most Licensees, it focuses on the client experience. As a compliance platform, OpenAFSL better differentiates between intent, process and outcomes, considering matters in context.
Think about how easy it is for the leading licensees to be able to make evidence based decisions about remediation, regulatory responses and resources when you have granular data on which to rely.
Data is, as we’ve said before, the new oil.
For a relatively low licensing fee (based on user numbers) you’ll secure the data, systems, training and support the Regulators expect you already have.
Pricing is flexible and customised to your needs.
Contact us if you have any questions about the data, the system or our observations.