Strong businesses are built on strong processes. It is an approach that is even more crucial in heavily regulated industries such as financial planning, which must constantly adapt to new legislative requirements.
It has been almost a decade since the Future of Financial Advice (FOFA) reforms, which introduced requirements such as the Best Interest Duty, banned conflicted remuneration, and required clients to opt-in to ongoing fees. But the flow of change has barely slowed, particularly after the Royal Commission in 2018.
Advisers must better manage business risk to comply with increased regulation.
It is little wonder that even in the midst of the initial COVID-19 pandemic in 2020, advisers still rated the compliance burden as their largest business challenge (68%), according to an Investment Trends survey.
One way to manage these risks is to create key risk indicators (KRIs) that reflect a practice or dealer group’s particular vulnerabilities, according to ASIC. They can be set by categories: product or advice type, adviser profile and customer profile, to match the nature and scale of each business.
Workflows can also assist in ensuring key compliance steps are performed.
Maximising the effectiveness of this framework requires a digital approach that can analyse information and make it easily accessible, as opposed to paper-based records and legacy IT systems. A strong digital record of client interactions and advice builds value and future proofs a business if an adviser wants to sell as they approach retirement.
An advice platform must make compliance as seamless as possible and be easy to implement. Yet a recent ASIC investigation found that more than half of licensees lacked effective processes to remind them when fee renewal notices were due or to turn off ongoing fees.
One of the reasons technology has not been more effective at meeting the regulatory challenge is that many platforms were built for a different era. They were built to drive product sales rather than empower clients to meet multiple goals.
Compliance needs to be deeply embedded within a modern advice process to create the efficiencies that advisers need, so they can spend time with clients and on other revenue-producing activities.
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