Smarter Compliance. One of the critical failures of the compliance function is its tendency to identify and publish failures rather than promote and encourage better practices. Their reasons are understandable, but focusing on failures does a disservice to those advisers looking for practical ways to exceed minimum standards. In a break with Compliance’s standard operating procedure, this article will focus on five ways that advisers transcend compliance. Based on our review of 3,000 advice files, we’ve identified the consistent and considered practices great advisers adopt.
Smarter Compliance. Assured Support has long argued for the need to collectively develop a capability framework for the compliance staff. Luckily, we are laser focused on this, and have developed a capability framework covering both technical and non-technical skills. This article looks at the reasons why this is necessary and provides a structured path forward.
Smarter Compliance. Your client’s goals and objectives are the foundation on which great personal advice is built. Unfortunately, they are too often confused, used incorrectly or relegated in importance behind a client’s risk profile. This article explains the difference between Goals and Objectives and provides some simple tips to avoiding common failures.
Smarter Compliance. In a previous article we discussed Continuing Professional Development requirements under the Financial Adviser Standards and Ethics Authority (FASEA). In this article, we’re focusing on qualifications and, in particular, the completion of a bachelor or higher degree, or equivalent qualification, approved by the standards body. FASEA’s requirements appear deceptively simple, but the path to compliance with their requirements can conceal dead-ends, reversals and unanticipated complexity. Assured Support can guide you through.
Smarter Compliance. 2019 is shaping up to be a great year for financial services lawyers, business brokers and stress counsellors. Advisers have long accepted that the financial services industry is highly regulated and frequently changing, but the sheer scale and speed of reforms planned for 2019 is potentially overwhelming. We can’t do much about the rate of change, but we can alert you to the recently released Consumer Data Right rules, warn you about proposed changes to the Privacy Act to better protect (vulnerable) consumers and prepare you for the impact of new Design and Distribution obligations.
Smarter Compliance. The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry may not have delivered Bankers in handcuffs but its legacy is likely to be more profound. The criticism ASIC attracted for embracing deference over deterrence and their timidity and ineffectiveness was painful for those of us that value compliance, obey the law and recognise the need for a fearless, effective and consistent regulator. ASIC endured the public criticism and have emerged with a renewed vigour and with the people, powers and purpose they need to restore confidence and deter misconduct. This article addresses the relevant changes and their implications. We also offer seven immediate priorities for Licensees looking down the barrel of these changes.
Smarter Compliance. The elegance employed when drafting Regulatory Guide 146 Licensing: Training of Financial ProductAdvice and the flexibility afforded to Licensees by s 912a(1)(f) is too frequently ignored. This article explores the reasons why too many licensees never recognise the commercial and compliance opportunity presented to them by RG146 and looks at why that’s the case.
Smarter compliance. Best Interests. Safe Harbours. Client Priority. All the drama with the Royal Commission has distracted attention from the only issue that really matters - To what extent are advisers acting in their clients’ best interests. The short answer from us is that the best advisers have never wavered from their ethical and professional commitment to act objectively in the interests of their clients. For these advice professionals, the best interest duty, simply reconfirmed their approach to advice, service and care. This might not be the case for all advisers. This article explores these issues with reference to both the #BankingRC Final report and Hub24’s excellent 2019 report “The Adviser’s Best Interests Duty: Creating Better Advice.”
Smarter Compliance. 2018 might have been an embarrassing, dramatic and traumatic year for the financial services industry (and the Commission’s Final Report is yet to come) but Compliance Professionals have had enough ‘gloom and doom’ for the moment. As 2019 lurches forward, we identify three ways that 2019 could be a very good year for compliance staff. Sure, you’ll still be over-worked and misunderstood but you may also start to be appreciated and valued. Work smart, seize these opportunities and you’ll transform your role and increase your influence. Good luck.
Smarter Compliance. In this guest post, education expert, Angelique Aksenoff, introduces the great divide in competency standards and asks “what will happen to RG 146 and Tier 2 advisers with the uplift to financial adviser education and training standards?”. Identifying that shifting Tier 2 standards will have a far more profound impact than many anticipate, the author explores the challenges and likely consequences of these essential reforms.
Smarter compliance. Good advice, as Sean Graham explains, demands solutions driven by the clients’ best interests and supported by the adviser’s bona fide consideration of alternatives. Very poor advice, in my experience, often fails to prioritise the clients’ interests. Poor advice, on the hand, often results from a failure to rigorously, efficiently or fairly considering options. The safe harbour steps require advisers to research products they’re recommending as replacements (and those they’re recommending to be replaced) but some advisers still struggle with the requirement. This article answers some of the questions we get from advisers on product replacement.
NSG v ASIC aside, financial planners often struggle to find cases that clearly address their legal obligations and duties. Thankfully, McDonald v AMP Financial Planning Pty Limited  QSC 195 addresses both the practice and process of financial planning and, as a consequence, highlights expectations that advisers need to adequately consider in their own businesses. Here we look at five key take-outs from McDonald’s case.
One of the most surprising insights from completing hundreds of adviser reviews, is the relatively small number of advisers who are interested in moving 'beyond compliance'. The challenge is compounded by risk. Some licensees use compliance results as part of a balanced scorecard or as the basis for bonuses and promotion. So improving the quality of advice, and getting a better review result, has additional benefits. Assured Support's risk and conduct-based methodology expects compliance and rewards quality, so to help make your journey a little easier, we'll share seven steps you should take to achieve better review results.
Licensees and advisers have traditionally relied on disclosure as the solution for a range of regulatory, advice and legal risks. The fundamental problem is that disclosure is a spectacularly ineffective consumer protection mechanism. In the context of the Banking Royal Commission, both the Government and ASIC are focusing on trust, transparency and accountability as better alternatives to disclosure and equipping ASIC with the powers it needs to be active, feared and effective. In this context, the course of action for licensees and advisers is clear - less disclosure, more clarity.
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.
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.
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.
If you’re a Licensee, Compliance Manager or Responsible Manager, you’re forgiven for feeling overwhelmed, fatigued and dispirited. The rate and extent of regulatory change, consistent and critical media coverage, increasing costs and declining revenues and the constant anticipation of regulatory intervention make a challenging job almost impossible. Even with the best of intentions, it's often difficult to prioritise activity when your capacity is consumed by reactive responses to unforeseen issues. This article addresses what we think should be your 'Top Three' priorities for 2018.
The best interests duty ambitiously requires the provider to "act in the best interests of the client in relation to the advice". The 'safe harbour' steps, are a statutory framework that is a partial, and not terribly effective, defence against apparent failures to act in a client's best interests.
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. 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.
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.
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.
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.
While it may not be immediately obvious, the embrace of “rules-based compliance” and its obsession with meeting (but often failing to meet) the letter of the law, has also shackled an emerging advice profession to incentives, legacies and values that have restricted its maturation. So what is the better alternative for advisers and licensees?
Smarter Compliance. It's difficult for most people to appreciate the particular and ongoing challenges faced by Compliance Managers in financial services. The role itself, and the contribution it makes to the business by whom they are employed, is often a subject of heated debate. I've been lucky enough to work under leaders whose support and engagement with Compliance was a natural and inevitable outgrowth of their ethical values and deep commitment to the wellbeing of their staff, clients and brand. I've also worked under, and with, a great many people with alternative approaches. This post contextualises the role of the Compliance Managers and outlines some strategies that Compliance Managers can use to help achieve their potential.
Despite the recent coverage, there’s no fraud epidemic in financial services; but it’s inarguable that the increased reporting undermines public confidence in the advice profession. Licensees (and advisers) need to do more to detect, prevent and mitigate adviser fraud. Here are ten "red flags" for which you should look.
Smarter compliance. If you were registered on the adviser register prior to 1 January 2019, and preparing for the exam or the qualification, you’ve been given a temporary reprieve. The Assistant Minister for Financial Services, Superannuation and Financial Technology, Jane Hume, has thrown you a lifeline by announcing a 2-year extension for the FASEA qualification to 1 January 2026, and a 1-year extension for the FASEA approved exam to 1 January 2022. This article explores the deferment and its practical impact. It even offers practical solutions for those advisers hanging on by their fingertips and wondering how to move forward.
Smarter Compliance. After months of apprehension and uncertainty, almost 600 advisers sat the inaugural FASEA exam and over 90% passed. This result would normally be interpreted as a positive one, but many people have simply seized on the result and dismissed the exam entirely. The high pass rate may be reassuring, disappointing, both or neither but there’s a high chance that it can be misleading. This article explains why most advisers should continue to prepare for a challenging examination of their knowledge and capability.
Smarter Compliance. Professional advisers understand that they’re now required to commit to a programme of Continuing Professional Development (CPD) that is consistent with FASEA’s requirements to “develop, maintain and apply a high level of relevant knowledge and skills”. Standard 10 of the FASEA Code of Ethics articulates expectations reinforced by FASEA’s FPS004 CPD Policy outlining mandatory competency areas. One of those competency areas is “Client Care and Practice”. We’ve been deluged by advisers asking what this means in practice. In addition to offering Licensees a practical perspective this article outlines how an innovative reg-tech compliance platform, OpenAFSL, can optimise their approach.
Smarter Compliance. Some advisers seem to fear the FASEA exam even more than the inevitable Zombie apocalypse. Their apprehension is understandable but only legitimate if they ignore their deep, practical understanding of the the financial services laws and the challenges of dealing with retail clients. Any adviser currently authorised by a responsible Licensee should have the the knowledge and the practical wisdom they need to satisfy FASEA. This article addresses advisers’ apprehension and provides some tips for managing it.
Smarter Compliance. Effective education and ongoing training is the bedrock of every profession. So how can an advice profession emerge from an industry that prefers validation and convenience over development, engagement and deliberate practice? In our view, it can’t. In this article, we explore Continuing Professional Development from a different perspective - the sustainability of advice businesses - and argue that FASEA are right to push for tailored, engaging and challenging CPD.
Smarter Compliance. FASEA Code of Ethics is more a “set of principles and core values” than detailed rules, but it’s a principles based model that provides the parameters for ethical and professional conduct. It’s driven by admirable intent but the ambition and inchoate aspirations of the Code of Ethics threatens the sustainability of the profession it hopes to shape and confirm. This article ponders the inconsistency between the laws and the Code and highlights three ways that its more impractical provisions may affect the emerging advice profession.
Smarter Compliance. The new Continuing Professional Development (CPD) Standards released by the Financial Adviser Standards and Ethics Authority, provide useful guidelines for transforming the profession. Unfortunately, depending on your perspective, they were delivered either too late or too early for most licensees. One could complain, but, when you’re in mid-flight, your only real option is to adapt to the conditions and do everything you can to ensure you stick the landing. Sure, the flight metaphor is overworked but the article quotes David Bowie and is packed with the analysis and insights you need to operationalise these requirements. Hurry, 31 March 2019 will be here before you know it.
Smarter Compliance. Since their introduction in 1999, the popularity of the SMSF has remained relatively constant despite the ups and downs experienced within the share market, housing market and industry. We review a lot of advice. While our experience with SMSF doesn’t entirely accord with ASIC’s view that 90% of SMSF advice is ‘poor’, we have noticed some common issues in the advice we have reviewed. This article discusses five elements you need to address to ensure that your SMSF advice doesn’t “suck”.
Smarter Compliance. We are now on the eve of the implementation of the Corporations Amendment (Professional Standards of Financial Advisers) Act. FASEA and this legislation will significantly change the training, education and ethical standards for financial advisers and reshape the advice profession. This article explores the significance of the proposed change in education standards, maps out the practical differences and draws on similar examples to highlight the facts that advisers will need assured support to weather these changes.
Despite the emphasis on regulated documents, and the increasing use of technology, advice has an oral foundation. Unfortunately, memory is imperfect. In reality, a failure to appropriately document client conversations, answers or agreements can challenge your credibility and expose you to additional risk. Poor file-noting may not be fatal for you, but in the event of a claim or dispute, courts may draw adverse inferences from scant or non-existent file-notes. This article addresses these risks and suggests ways you can avoid undercutting your professionalism or prejudicing your defence.
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.
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.
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).
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.
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.
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.
Previously, we've addressed aspects of the advice process including Goals and Objectives and File Notes, but with ASIC's recent focus on vertical integration (Report 562), we thought we’d discuss the perennial issue of alternate strategies.Cynics might suggest that alternative strategies are only included to make the advisers’ recommendation appear more considered, less biased and more reasonable. So, why do advisers need to ‘waste time’ thinking about and recording strategies and products that are inferior to what they recommended?
Vertical integration isn't necessarily a problem but successive ASIC reports tend to suggest that it is. Report 562 casts shade both on vertically integrated advice businesses and the effectiveness on their compliance resources. Report 562 summarises ASIC's review of "Australia's largest banking and financial services institutions" and notes that 75% of the advice reviewed was "non-compliant advice". Read the report to understand how vertical integration, the elephant in the room, needs to be addressed if an advice profession is to emerge.
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.
Your client’s goals and objectives are the foundation on which personal advice is built. Unfortunately, they are too often confused, used incorrectly or relegated in importance behind a client’s risk profile. In other cases, they’re reduced to generic and undifferentiated statements that lack detail and the reflect the planner’s recollection rather than the client’s relevant personal circumstances. Practically, the most powerful statement of your clients’ goals and objectives are the ones that come from the clients and are recorded in as close to their own words as possible. After all, isn’t the fundamental purpose of personal advice to deliver what the client needs and wants?
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.
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.
Most Australians would significantly benefit from receiving financial advice, but relatively few ever receive the financial advice they need. Cost, complexity, inconvenience and apathy all play their part, but consumer apprehension, the fear of being “ripped off”, is also a significant contributor to this outcome. This article won’t provide personal recommendations, but it will outline seven practical considerations that would help identify a better financial adviser. Individually, none of them is sufficient, but together these seven aspects will help weed out the pretenders and point consumers in the direction of the professional advice they need.
Smarter Compliance. While you may have dismissed your Compliance Manager’s obsession with effective management as an obvious and transparent attempt to secure significance, the reality is that your governance framework - and your demonstrable commitment to good governance - is the foundation of your compliance framework. Without an effective governance framework, you cannot, and will not, comply with the financial services laws and the conditions of your licence. This article explains why good governance matters and provides tips for improving your decision making framework and its consistent and deliberate application.
Smarter Compliance. The Regulators’ focus on large institutions, and APRA’s self-assessment initiative, identified consistent deficiencies in the way Licensees respond to incidents, breaches and non-compliance. 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.
Smarter Compliance. In May 2019, APRA released an Information Paper reporting on the results of self-assessments performed by 36 financial institutions. Focusing on governance, accountability and culture, the responses indicated that CBA is not an outlier and that the issues that exposed them to public and regulatory criticism, are also present in their competitors and peers. Perhaps, the only differences are time and orders of magnitude. This article references the report and offers suggestions to those Licensees hoping to improve their culture, governance and compliance framework.
Smarter compliance. Despite their focus on conduct and disclosure, Regulators are increasingly turning their attention to licensees’ ‘culture’. It’s a reasonable approach if one ignores the reality that the definition is circular and that organisational culture is not monolithic; most large institutions are collections of disparate and disconnected cultures. Nevertheless, Regulators show no sign of abandoning this idea, so Licensees must consider how they can best demonstrate a ‘good culture’ and their commitment to key principles. Drawing on international examples, this article proposes ways in which this can be done.
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 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.
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).
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.
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.
On 26 June 2014, The Senate’s Economics References Committee published its report on the performance of the Australian Securities and Investments Commission. The report has been widely covered in mainstream media. Although presented as simply an assessment of ASIC’s performance based on two distinct case studies, the report was highly critical of both ASIC and the Commonwealth Bank of Australia; criticisms relentlessly pursued and compellingly presented by Adele Ferguson in her articles for Fairfax and in her Four Corners’ story. The Committee made 61 recommendations and a number of observations about both ASIC and CBA. This article is a high level review of the more interesting aspects.
Although it’s difficult to assess its impact on the broader community, there is little doubt that Four Corners’ “expose” of Commonwealth Financial Planning generated contemplation, conversation and consternation in the financial services industry. The recent story “Banking Bad” by Adele Ferguson and Deb Masters focused on the sales-driven culture inside the Commonwealth Bank's financial planning division; but it also raised additional questions about the structure and composition of the broader advice industry.
A recent report on the financial services industry noted that while industry executives "champion the importance of ethical conduct …. they struggle to see the benefits of greater adherence to ethical standards". So how do we reconcile statements that "ethical conduct is just as important as financial success at their firm" with acknowledgements "that strict adherence to such codes [makes] career progression difficult." What does this contradiction really mean for Compliance Managers and shareholders?
Smarter compliance. In a previous newsletter, we addressed five common errors in Self-managed Super Fund advice. We also included some frightening statistics surrounding the level of trustee knowledge, and the adviser’s role in the advice process. In this article, a former adviser draws on his experience to nominate five critical considerations (and accompanying ballads) that deserve closer consideration.
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.
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.
Martin Culleton, a Partner with regional law firm RMB lawyers, was the solicitor for Noel Stevens (and then the estate of Noel Stevens) who took on Commonwealth Financial Planning over inappropriate advice, secured a decision in his client’s favour and successfully defended CFP’s appeal against the initial judgment. In this post Culleton talks about Commonwealth Financial Planning v Couper, compliance, conflict and the specific challenges faced by advisers within vertically integrated businesses.
In the context of Commissioner Kell's crusade against commissions, churn and conflicts, risk advisers' processes have started to attract a heightened degree of regulatory attention. Despite the expected legislative roll back of some FOFA elements, regulatory scrutiny of risk advice is only likely to increase in the wake of the New South Wales Court of Appeal's decision in Commonwealth Financial Planning Limited v Couper  NSWCA 444. This article considers what FOS, ASIC and PI Insurers are likely to take from this decision and suggests steps Advisers should take in response.
Smarter Compliance. The US Department of Justice asks three fundamental questions when reviewing corporate compliance programs 1. Is it well designed 2. Is it implemented effectively 3. Does it work in practice. We believe that local Regulators take a similar approach and this underpins our conviction that regulatory technology - like OpenAFSL - is the future of advice. You may have a different view but this article contains arguments that should convince any reasonable Licensee that we’re right.
Smarter compliance. Welcome to the July 2019 update. We have big news. The financial service industry is highly regulated and surprisingly dynamic. Thankfully, the team behind our industry-leading compliance platform ensures openAFSL evolves even quicker. Regulators know that there’s a serious gap between what the law requires and what most Licensees manage to do - openAFSL helps you bridge that gap at a reasonable cost.
Smarter compliance. Welcome to the April 2019 update. We have big news. The financial service industry is highly regulated and surprisingly dynamic. Thankfully, the team behind our industry-leading compliance platform ensures openAFSL evolves even quicker. Regulators know that there’s a serious gap between what the law requires and what most Licensees manage to do - openAFSL helps you bridge that gap at a reasonable cost.
Smarter Compliance. Happy New Year. 2018 was a challenging year for many Licensees but, for all its tension and drama, it highlighted problems that openAFSL solves and introduced new issues that we had anticipated. While others were caught flat-footed, our reg-tech platform quietly deployed the solution they needed. There’s still time for you and we’re happy to help. Call or email us to learn how OpenAFSL can ensure that you act “efficiently, honestly and fairly” in 2019.
Smarter compliance. While their peers have been focused on Christmas parties and their eroding cryptocurrency fortunes, our Development Team has been slaving away to deliver even more enhancements. When you see what they’ve delivered, you might even agree they deserve Christmas Day off this year.
Smarter compliance. We live in interesting times. While many participants are intimidated by the Royal Commission and ASIC’s Report 594, we just kept coding to ensure that OpenAFSL continues to deliver on its promise. We crushed it in September. The full list of tweaks, enhancements and innovations would overwhelm you but, in this article, we’ll cover some of the main ones.
Smarter compliance. We’ve been thinking about you. Well, mostly about coding, ASIC and behavioural change, but also about you. We thought you might like to learn 20 ways to improve your compliance result, understand what changes have been made and get advance notice on the changes that are imminent. If you have questions try firstname.lastname@example.org or email@example.com.
If you're focused on the future, and want to build a sustainable advice business, you'll want to find out more about openAFSL. You know that “minimal or technical compliance with the law” is not a worthwhile pursuit and, as a competent Licensee, you understand that regulatory technology is critical to you achieving that goal. OpenAFSL is the flexible and intuitive platform you need. Here’s why.
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
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.
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.
If you’re running an advice business, you know that you are required to establish and maintain sufficient measures to ensure your compliance with financial services laws. Clearly, the sophistication of the measures, processes and procedures you have in place (which may be paper based or integrated IT systems) will vary according to the size and sophistication of your business. In our view, the only way to comply consistently, effectively and efficiently in a complex and frequently changing environment is to embrace regulatory technology. Before you do, there are seven questions we think you should ask.
Our Compliance Solution, openAFSL, is an openAPI because we consider it the best way for our platform to solve our users' needs. This report, published by Apigee Corp in 2017, provides a strong argument in favour of collaboration for growth.
December 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.
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.
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.
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.
Smarter Compliance. 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.
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?
In November 2014, we presented on "The Future of Financial Advice" at the ASFA National Conference. ASFA (The Association of Superannuation Funds of Australia) is the peak policy, research and advocacy body for Australia’s superannuation (super) industry.
Smarter Compliance. Many licensees have, traditionally, treated compliance as a ‘necessary evil’ or a function generally irrelevant to their day to day activities. Fortunately for consumers, the Royal Commission publicly highlighted the consequences of this approach. The grudging acceptance of ‘compliance’ has now been replaced with a more polished rhetoric, but in an environment characterised by increased public scrutiny and an increasing appetite for litigation this may not be enough. This article argues for the need to pre-empt legislative changes by adopting a forward-looking approach to compliance; it’s simply better business.
Smarter Compliance. The conflicts between interests and duties was an issue frequently touched on by the Royal Commission. In fact, observers might suggest that all the misconduct and mismanagement exposed was caused by conflicts of these sort. In this article, an auditor tackles the issue form a practical perspective and explores the best way to handle conflicts of interest and duty.
Smarter Compliance. The financial advice market is, depending on your perspective, either evolving or being disrupted. Technology - digital advice - presents a compelling alternative to the expense and risk of traditional distribution models. But, before we despair about the unfairness of replacing advisers with computers and algorithms (or celebrate the emergence of an objective and unbiased advice service) it’s important to appreciate that the models have similar issues and that while the nature of regulation may change, it’s as essential as it is now.
Smarter Compliance. ASIC’s report 615 “ASIC Enforcement Update July to December 2018” provides a snapshot of the prosecutions, bannings and investigations they undertook. It’s an impressive list but is, in our view, a low water-mark for 2019 activity. With increased funding, a bigger and better toolkit and a renewed willingness to act, ASIC seem to be better positioned to effectively, efficiently and consistently regulate the financial advice industry. Expect a king-tide of regulatory activity in 2019.
Smarter Compliance. On 22 February 2019, Treasury released exposure draft legislation titled Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 which, if ever introduced, passed and enacted, will prohibit the payment to financial advisers of grandfathering conflicted remuneration. These amendments could have a significant effect on the advice industry. However, there’s still time for consultation, so this article summarises the key issues and the challenges posed by the proposed regulations. It’s no substitute for specific legal advice, but it’s considerably cheaper and more accessible.
Smarter Compliance. Since 23 February 2018, entities subject to the Privacy Act have had a legal obligation to record, manage and report ‘eligible data breaches’. If you were subject to the Australian Privacy Principles, you’re required to report data breaches but some Licensees may still be unfamiliar with their obligations. This post addresses the requirements, makes recommendations and provides some additional reading on data breaches.
Smarter Compliance. In their February 2019 Update, ASIC noted that “There are 12 recommendations that are directed at ASIC, or where the Government’s response requires action now by ASIC, without the need for legislative change. ASIC is committed to fully implementing each of these,” This article provides a high level view of the recommendations and ASIC’s responses.
Smarter Compliance. This year will be a challenging and momentous year. Change may be inevitable and irresistible, but it needn’t be fatal. The better licensees and advisers have already separated themselves from the pack and started to transform themselves to succeed in the new environment. This article explores what they’re doing and how they’re doing it. Don’t be left behind.
The Banking Royal Commission quickly and easily exposed profound and systemic non-compliance with the breach reporting obligations. Breach reporting may be "an important part of the regulatory framework" but the Commission’s hearings (and the Interim Report) show that, “on more than one occasion”, Licensees materially failed to comply with this obligation. Worryingly, they appeared to have suffered no consequences as a result of their failures. ASIC’s Report 594 on compliance with the breach reporting obligations highlights the extent of, and reasons for these failures. This article looks at three key take-outs for Licensees seeking to avoid regulatory censure.
With the first half of the year now behind us, ASIC have recently released REP 585 (ASIC enforcement outcomes: January to June 2018). It highlights their activity in early 2018 (focusing on some notable successes) and looks forward to hint at what we can expect from them in the next six months. This article focuses on the report, ASIC’s plans for the remainder of 2018 and what they mean for Licensees and advisers.
In his recent speech “The trust deficit and superannuation, ASIC Chair James Shipton suggested three issues that Licensees need to address to restore trust and confidence in the financial services industry.
This post explores those suggestions in context, and outlines some practical steps Licensees should take in anticipation of future ASIC activity.
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 explores ASIC’s views and provides tips for better results.
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.
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.
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.
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.
You’re probably aware that, since 23 February 2018, entities subject to the Privacy Act have had a legal obligation to record, manage and report ‘eligible data breaches’. If you’re currently subject to the Australian Privacy Principles, you’re now required to report data breaches. This post addresses the changes, makes recommendations and provides some additional reading on data breaches and the new requirements.
Cryptocurrencies may have been “the future of money since 2009”, but digital currencies – like Bitcoin, Ripple and Ethereum – are only now being enthusiastically embraced by the general public. This guide for Financial planners addresses the inherent risks and benefits of cryptocurrencies and Regulators' response to their increasing fervour for virtual currencies. The guide considers whether, and to what extent, digital currencies can be considered alternative assets. It explores the practical challenges advisers face in dealing with cryptocurrencies and provides a number of tips to avoid trouble.
ASIC's industry funding model commenced on 1 July 2017. Designed to ensure that those who create the need for, and benefit from, increased regulation (and increased regulatory attention) bear the costs of these benefits, it proposes that the costs of ASIC’s activities will be recovered through a combination of "ongoing levies on regulated entities and individual fees for user-initiated regulatory functions (such as licence applications)." The "fees for user-initiated regulatory functions", and ASIC's new Service Charter, are the subjects of this article.
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.
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.