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.
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.
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.
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.
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.
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.
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.
The Law requires that all AFS Licensees who provide financial services to retail clients must have adequate arrangements in place for compensating retail clients. In practice, this requires Licensees to maintain adequate PII unless an exemption applies or alternative arrangements have been approved by ASIC. This article summarises the review.
September release notes for the 'holy grail of compliance systems'. openAFSL frees licensees from the burden of compliance. This update contains the refinements, bug fixes and performance improvements that will only improve your commercial advantage over your less regtech-savvy competitors.
This report from the Central Bank of Ireland provides a well considered perspective of the key challenges for digital financial services and identifies accountability as a critical consumer issue. A must read for anyone interested in fintech or regtech.
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.
The Industry's eagerness to invest in technological compliance solutions is both commendable and personally appreciated, but a measure of caution is required. The fundamental failure of most reg-tech "solutions" is that they are, in most cases, applications looking for a problem rather than automated solutions to real problems. Solutions should be "compliance driven" rather than "technology driven". In my opinion, reg-tech's purpose is to address conduct risks and regulatory burdens efficiently, effectively and in a way that improves the profitability and sustainability of the user's business.
Forget compliance. Embracing Regulatory Technology is an investment in the sustainability and relevance of your business. Licensees and advisers alike struggle to reconcile compliance, productivity, liability and expense control. It’s a difficult balancing act, but, in a complex and highly regulated market, doing so well is essential for maintaining a successful and sustainable advice business.
Struggling to understand how to recognise 'appropriate' risk advice? Worried whether reasonable advice meets the best interest duty? This article tackles these ideas and argues that appropriateness doesn't require an adviser to provide perfect or ideal advice. Nor does it require the adviser to provide the highest level of care. 'Appropriate advice' is fit for purpose and based on the risk professional's consideration of their client's relevant personal circumstances.
The safe harbour provisions were intended to provide advisers with clarity about how to satisfy their best-interest duty, instead they have compromised it. In practice, checked steps and repeated commitments “to act in the client's best interests” are substituted for any real attempt to act in the clients’ best interests. Licensees, and advisers, obsessively focus on the “safe harbour” provisions, and how to demonstrate how their advice is in the client’s best interests, rather than obsessively focussing on providing advice that is, in fact, in their clients’ best interests. Safety, and better advice, requires advisers to set a new course.
The financial services industry has much to recommend it; it’s complex, uncertain, frequently changing, over-regulated and highly scrutinised. These elements make it a challenging and dynamic industry, but it’s precisely these conditions that make the emergence of an advice profession both necessary and inevitable. We're mired in complexity, but perhaps by prioritising outcomes over processes we'll achieve both improved clarity and better consumer outcomes.
The Corporations (Professional Standards of Financial Advisers) Act provides a great opportunity to transform the advice industry by defining what is acceptable Continuing Professional Development (CPD). This articles urges the Standards Body to seize this opportunity and presents seven ways to change CPD to improve adviser capability and competence.
Culture. Compliance. Misconduct. In a year of scandals, regulatory action and relentless media scrutiny, the failure of licensees – or their highly paid and well-promoted management teams – to honestly assess and check their own conduct is both incredible and disheartening, but it's not just an Australian problem. Focusing on the Wells Fargo scandal this post explores how "culture", conflicts and conformity can compromise ethics, vision and values. It also offers ten (10) tips that businesses can follow to avoid similar public scandals.
If you work in financial services, you understand that bored indifference, feigned interest, and eye-rolling are common reactions to most "Compliance" conversations. The brutal reality is that for most people, Compliance is simply “meh” - uninspiring, undesired and unexceptional. That's a bitter pill to swallow, but changing perceptions starts with first acknowledging the reasons why compliance elicits this reaction.
If you are a compliance and risk professional, you probably often feel different to the people around you. But like millions of other workers, you probably also capped off 2016 with a brief burst of reflection and committed yourself to doing some things differently in 2017. Congratulations for taking the lead. If your champagne-sodden resolutions were no more specific than “have a better year” this article presents three practical steps you can take to significantly improve your performance in 2017.
Digital advice may be new, but consumers will be happy to know that the obligations that apply to traditional financial product advisers also apply to digital advisers. This article addresses the key compliance issues.
As financial services experts, we know that investors who do not use advisers, underperform when compared to the annual average returns to the market. We also know that studies have also shown that poor investment results are often a direct result of the investor’s behaviour, rather than the performance of the portfolio or its underlying assets. It should be obvious that automating some decision-making processes will help investors make better investment decisions and achieve better outcomes. So how do we explain the industry’s hesitation to embrace digital advice?
The Financial Service Industry's obsession with "compliance" is unhealthy and counterproductive; it creates unrealistic expectations of error-free business, ingrains negativity bias in the corporate DNA and shields management incompetence from proper scrutiny. The solution isn't to abandon regulation but rather to reframe the game around players' responsibilities.
The increased public focus on vertical integration and the dangers of institutional advice has, understandably, driven an increasing focus on independent advice. The challenge, for both consumers and advisers, is that “independence” is neither consistently nor effectively defined. This article considers whether "Independence" and "institutional alignment" can co-exist and asks whether the profession needs to define independence on the basis of outcomes rather than structures.