“You say you want a revolution
Well, you know
We all want to change the world
You tell me that it’s evolution
Well, you know
We all want to change the world”
— The Beatles “Revolution” © Sony/ATV Music Publishing LLC
The Advice (R)Evolution
2019 was the year an emerging profession grappled with increased expectations, operational stress and the challenge of reconciling efficiency and ethics.
Thankfully, the confusion, complications and complexity of 2019 is behind us. As disruptive as it was, the changes introduced last year have defined our path to professionalism and self-regulation.
So, if 2019 was about helping you identify the ‘new normal’, we want 2020 to be the year you achieve happiness and prosperity.
Before you dismiss this aspiration out of hand, understand that where others see confusion and complexity, we see the opportunities and advantages that courage and innovation will make available to you.
We’re optimistic about the future because we’re prepared; as a business, we committed (and continue to commit) significant resources to anticipating change and helping our clients process increased regulatory expectations, resolve operational stress and reconcile efficiency and ethics.
That’s easy to say. What have we done?
Ethics and behavioural change
You’re probably aware that our Advice Assurance methodology was built on a risk-based approach to compliance and has, at its core, an embedded focus on quality, aspirational conduct and behavioural change.
While others’ compliance frameworks embraced legalism and formalism, we took the position that the substance of an advisers conduct, and the quality of their advice, is far more important than ‘technical elements’. To be clear, technical compliance is important, but what separates great advisers from their peers is not their formal compliance with legislative minimums, but the discretionary and qualitative efforts they make to ensure their advice is personalised, contextualised, understood and engaging.
This is why we focus on quality.
This is the reason why our review methodology has always emphasised qualitative and ‘human’ measures – fairness, comprehension, clarity, proportionality and decency – over disclosure and dehumanising processes. This is why our professional development courses focus on operationalising these elements.
Our clear focus on context, ethics and intent, means that our clients have, since 2012, been measured against standards that equal or exceed those proposed by FASEA in their Code of Ethics.
That doesn’t mean that 1 January 2020 came without any change to our review process. We made changes, but our processes needed far less significant changes than others did.
Our Professional Development Calendar
What gets measured, gets managed.
The Advice Assurance Review
In mid-2019, we made a strategic decision to more formally embed behavioural insights made by Nisbett, Kahneman and Thaler into our Advice Assurance process. To be both clear and concise, please understand that
In 2019 we tweaked our review methodology to better differentiate construal elements (environmental and structural considerations) from preferences (ethics and conduct). We implemented techniques to ‘nudge’ advisers towards better conduct (and better outcomes). We also introduced refinements to better reconcile conflicts by demarcating between formal and substantive compliance issues.
In practice, this led to supplementing a systematic review of advice documentation with an equally meticulous focus on intent, process and outcome. Our increased focus on environment, ethics and conduct didn’t slow the review process, but they did ensure that Best Interest and related duties were given the priority they deserve. In fact, by formally embedding a “two stage” review process we’ve uncovered even richer and more actionable insights.
In respect of the Best Interest Duty, by abandoning the “safe harbour” checklist-led approach of institutional licensees, we are better able to consider matters in context and therefore better differentiate between intent, process and outcome.
In our process, the “safe harbour” provisions become relevant only where the adviser fails to demonstrate how they’ve acted in their client’s best interests (and they mitigate, but do not excuse, the BID failure).
It may seem complicated, but it’s simply a better approach and one that has improved advice quality and changed conduct. In fact, our data suggests consistent improvement over time.
We took a similar approach to the FASEA requirements.
The formal file review has always required a contextual and objective assessment of an adviser’s ethics and conduct, but that’s now reinforced by a supplementary consideration of any ethical or conduct failures against the specific FASEA standards. By approaching the Standards in this fashion, as an overlay rather than a ‘checklist question’, the Standards are integrated, contextualised and inter-related.
Given ASIC’s position on the FASEA Code, our approach assesses compliance with the Code as part of a Licensee’s “regular, ongoing monitoring of adviser conduct” but prioritises education, training and behavioural change. We’ll continue to clearly identify, escalate and report contraventions to the Licensee, but we’ll use the review as the best opportunity to provide training and guidance about conduct that is consistent/inconsistent with the Code. By increasing the ‘consequences’ of identified exceptions over time (”boiling the frog”) we’re more likely to embed the Standards and drive their adoption by advisers.
We’ll provide practical and direct instructions to advisers and both granular and thematic reporting to Licensee.
It’s a prudent and effective approach that gives our clients the certainty that their 1 January Code obligations are appropriately managed.
If you have questions about either our approach or our services, please contact email@example.com.
The Licensee Review
The Licensee Review was revised to emulate the the Advice Assurance process which enables to provide richer analysis, deeper assessment and more effective comparisons against our data set.
Better yet, our proprietary methodology delivers a detailed report that reconciles FASEA Standards against operational design with operational effectiveness. While the Licensee is not bound by the Code, their governance arrangements must neither hinder advisers’ ability to comply nor impede the implementation of necessary changes to their systems and processes. In addition, by aggregating the advice assurance data and themes, the Licensee Review provides a precise diagnostic and roadmap for improvement.
If that wasn’t enough, the review captures contextual details of observations and priorities (including ethics and conduct issues), documents people interviewed and records the reviewer’s assumptions and interpretations.
An immediate opportunity
We are an organisation that uses data and technology to identify insights and drive improvement.
While we may be the only Compliance provider that does this, we are not the only business with this philosophy and approach.
Elixir Consulting is equally focused on helping your business move forward.
Every two years, Elixir does industry pricing research. Their latest survey is still open and we’d encourage you to complete the survey to ensure that the information they collect is representative and relevant. If you participate you’ll receive a detailed report that may help you assess the competitiveness of your fees and structures.
If you participate using this link, and with your consent, we’ll be able to correlate your research data with your compliance data to give you a more granular assessment of your sustainability and governance.
The survey closes soon, so don’t delay.