Monitoring and Supervision, Consequence Management and Remediation are three elements of a compliance framework that best highlight, or expose, a Licensee’s capability and competence. Not only do they reveal fundamental aspects of a Licensee’s organisational competence but, more importantly, they expose its values, principles and standards. This article examines the practical issues of review and remediation, explores ASIC’s views and provides tips for better results.
2018 has been a tumultuous year for licensees and advisers. The introduction of the Life Insurance Framework, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the collapse of Terry McMaster (followed quickly by the collapse of Dover) have buffeted an industry already reeling from prolonged media and political pressure. Assured Support engages with businesses and advisers across Australia and this gives us an enviable perspective of our industry. Here are our top five observations of, and predictions for, the financial services industry.
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 but FASEA’s proposed examination requires careful consideration.
Managed Accounts are becoming increasingly popular, but some advisers (and compliance experts) struggle to understand the different options and how they’re regulated. This presentation is a modified version of one of our relevant training presentations. It focuses on Managed Discretionary Accounts but provides a useful overview of the topic. If you need more, contact us directly.
The Royal Commission has highlighted some curious processes followed by some of the larger licensees. Their laidback approach to breach reporting, in particular, has attracted the type of attention they might otherwise preferred to avoid. Breach reporting isn’t that difficult to grasp, but perhaps everyone needs a little help from time to time. This post covers the key things you need to know and the What, Why, How and When of breach reporting.
It's been a busy quarter for openAFSL. In addition to our usual program of continuous improvement, our capability has been bolstered by Kye's decision to help us free licensees from the burden of compliance. We're glad she's joined us to support the platform, help our clients and train our users to get the most out of openAFSL. This post addresses the key changes made in June SPOILER WARNING #Colour
Choosing a licensee is a big decision and one that needs to be made after assessing the risks the prospective licensee poses to you. The reality is that neither qualifications nor adviser mobility are the best indicators of 'Licensee risk'. They are not even reliable predictors. Unfortunately, the underlying causes of licensee risk can't be accurately divined from publicly available data, or at least not without considerable time, energy and insight. This looks at some common risk indicators before focusing on the real issue.
With focus on netwealth’s “AdviceTech Research Report” and the Banking Royal Commission, we try to explain the growing interest in reg-tech amongst forward-looking licensees. After watching larger financial institutions demonstrate the value of compliance by highlighting the cost of its absence, smaller licensees may be seeing this as an investment in their sustainability and a hedge against ASIC’s views of ‘poor risk cultures’.
As the Banking Royal Commission has highlighted, advisers have generally enjoyed unfettered mobility between licensees; neither their compliance, conduct nor capability have provided any real obstacle to determined licensees focused on growth. The obvious limitations of this approach are commemorated on the ASIC website and in Rep515, the Regulator’s recognition of “inadequate background and reference-checking processes” and releases on strategic changes and cancellation of licenses. This article proposes five steps to minimise the risks and costs of adviser recruitment.
One of the biggest decisions made as an adviser will be choice of Licensee. The recent closure of Dover may not have come as a surprise, but the speed in which it occurred still came as a shock to many observers. As we have previously argued, choosing the right Licensee is perhaps the most critical decision an adviser needs to make. This article explores the questions advisers should ask of their prospective licensee and identifies the signs by which an adviser can identify the right time to leave their current licensee.
The Australian Financial Complaints Authority (AFCA) is a new super-EDR scheme that 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. Although AFCA doesn’t open for business until later in 2018, Licensees (and others) need to consider membership and the consequential changes they’ll need to make to their disclosure documents and websites. This article explains ASIC’s relief and the extended transition timetable.
It’s hard not to read recent media coverage of our industry without anticipating a fundamental shift in advice. New education changes, a renewed focus on conflicts and a regulatory challenge to the ongoing service model that underpins the entire industry. While media focus on the institutional players, this article discusses the impact on, and opportunities for, professional advisers in the post-Royal Commission environment.
The Royal Commission into Misconduct in Banking, Superannuation and Financial Services exposed conduct - “fee for no service" - that shows contempt for both consumers and the law. Licensees' confected contrition aside, their ‘gold medal’ revenue generation strategies have further eroded their social capital and generated a wave of consumer outrage that is entirely justified. Unfortunately, those advisers that have worked hard to build sustainable businesses supporting their clients and servicing their needs, may find themselves collateral damage in this War of Accountability. This article looks at the FFNS issue, ASIC's response and proposes some immediate actions for advisers and licensees.
The Regulator’s focus on culture underplays the agency of management, staff and advisers and provides a convenient excuse for poor choices. Rather than focusing on culture, perhaps its better to focus on consequences. Consequence Management is not a complete solution (monitoring, supervision and remediation are equally important) but focusing on consequence management is an effective and efficient way to create and maintain a good corporate 'culture'. Properly applied, it may also spare you adverse publicity.
Conflicts of Interest seem endemic in financial services. The Banking Royal Commission has identified potential conflicts in the mortgage broking and lending sector. Approaches to conflicts are not consistent across the financial services industry. This post examines the key elements and, with a focus on mortgage broking, proposes some solutions for the identified problems.
Francis Bacon wrote “He that hath [a Licensee] has given hostages to fortune; for they are impediments to great enterprises, either of virtue or mischief” or at least he would have had he been entertained by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This article explores the acts and omissions of Licensees and the challenges facing licensees and advisers as a result of the Commission’s scrutiny of the financial services industry.
The mortgage broking industry has, for a variety of reasons, recently attracted an increased degree of regulatory attention. In the midst of a Royal Commission this is hardly likely to comfort alert mortgage brokers . As the Banks, that both dominate and compete with the mortgage broking industry, identify problems and propose solutions, brokers are left to puzzle out the likely consequences of these discussions. This article explores the reasons and the drivers for the anticipated reforms of the mortgage broking industry.
Robo-advice, and other technological applications, may have had less immediate impact than some participants predicted, but they're also likely to have a more profound impact than other participants expect. It's difficult to predict the future so we offer you some tools and insights to assist you - Starting with John McDuling's "Behind Spaceship's ASIC fine: drama, tension and false funding news" we add Gartners 'hype cycle', Mercer's Robo-advice report and Wired's excellent article "Beware of Roboadvisors Bearing Low Fees"
OpenAFSL, as a compliance platform, is constantly evolving in response to client suggestions, regulatory changes or our commitment to continuous improvement. Here are some of the refinements that went live on 1 April 2018. We think you'll love these but, spoiler alert, what till you see what's coming next.
In these series articles, two experts provide their (sometimes divergent) views of topics with which licensees and advisers sometimes struggle. They offer their opinions and occasionally some insight. Feel free to join the debate and offer your commentary. This article answers ten questions about managed discretionary accounts and it may help you identify the opportunities and challenges in embracing managed accounts.
As an advice professional, you know you need to actively consider your client’s needs, objectives and relevant circumstances. You understand your Best Interest Duty but remember that this requires more than a basic understanding of your client or a superficial acknowledgment of their needs.Good advisers don’t just listen to their clients, they ask better questions. This article explains how (and why you should emulate them).
For an industry already reeling from the implementation of the Life Insurance Framework, and anticipating worse from the Royal Commission, being told by the Parliamentary Joint Committee on Corporations and Financial Services (Life Insurance Industry) that they “must do better” is both depressing and disheartening. However, your mood might change when you notice their focus on the role and influence of product issuers and their attempt to move beyond remuneration arrangements to address systemic. This article will focus on the Consumer Protections, Codes, ASIC and Advice aspects.
In a four-state tour in March 2018, one of our team, Sean Graham, spoke at the ifa Business Strategy Day on "The rise of regtech and the art of the SoA".
Positioned as an "update on the compliance and legislative landscape", the session challenged industry assumptions about disclosure, independence and professionalism and demonstrated why an investment in regulatory technology is critical for sustainability.
If you're an advice professional, you know that misconduct, mismanagement and consistently critical media coverage has undermined confidence in our industry and led calls for increased regulation. We have the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and, recently, the Australian Securities and Investments Commission pursued two high profile matters based, to a large degree, on the Licensees' failures to ensure that their representatives complied with the law and complied with their 'best interest' duties. In this article we take a constructively critical look at the duty, the conduct that necessitated it and the practicalities of satisfying your professional duties. (Hint - disclosure is not enough).
Licensees and advisers frequently complain about the Statement of Advice but, for a variety of reasons, few make any effort to find solutions. ASIC try to steer professionals in the right direction, but embracing clarity and accountability is too risky for those accustomed to hiding behind paper shields of disclosures and disclaimers. There is a solution to dull, dense and depressing documents but it requires advice professionals to transform a disclosure document into an article of accountability.
We take a constructive approach to compliance. Our risk-based methodology and our focus on behaviours and operational risk, not only addresses your compliance risks but provides you with significant insights. You'll have questions. We have answers.
The ASIC 2018 Forum gave the new Chair, James Shipton, the chance to present his view of ASIC, the industry and the challenges we face. Although perhaps more measured than his predecessor, Shipton reinforced Medcraft's focus on trust and confidence but placed more emphasis on trustworthiness and professionalism.
Those that attended the 2018 ASIC Forum were left in no doubt that the most popular remedy for the harms done by the financial services industry, is increasing advisers' education and competency. Abandoning ASIC's previous focus on culture in favour of a new focus on competency, care and ethics, a succession of Presenters criticised the industry's lack of professionalism and asserted that a "greater level of professionalism" was needed to restore trust. While there's still an alarming lack of clarity it's apparent that Financial Adviser Standards and Ethics Authority Limited (FASEA) is the blunt instrument intended to force the transformation of the advice industry.