2017 saw increased focus on gatekeepers, 'one size fits all' advice models and the quality of Licensees' oversight. The results were not pretty. Now is the perfect time for Licensees to review their monitoring and supervision arrangements to ensure that they more effectively protect clients' interests, manage risks and satisfy ASIC's legitimate expectations. This article addresses these issues and lists some key points to consider.
The search for better investment choices has seen traditional model portfolios of managed funds and equities being abandoned in favour of managed account solutions that offer increased flexibility, greater efficiencies, direct ownership and often lower costs. The true level of their appeal is impossible to determine, but the growth of Managed Discretionary Accounts (MDA), Separately Managed Accounts (SMA) and Individually Managed Accounts (IMA) is inarguable.
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. Unfortunately, an increasing number of Licensees appear to use the 'safe harbour' steps both to prove the provider's compliance with their best interest duty and to establish the quality of the advice provided. Welcome to Bizarro World.
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.
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.
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.
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 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.