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Getting the Compliance Gorilla off your back
Brett Walker
SMART Compliance
Understanding the landscape
• Regulation – good intentions, ideology and lobbying
• Reasonable basis and conflicts disclosure
• FoFA – F*** off Financial Advisers
• LIF – Life Insurers Fiddling
Let’s tame the Beast!
Agenda
• Define the Gorilla
• Discuss potential solutions
• Settle on best approach/practice
• Answer any questions
Defining the (evolving) Gorilla
Defining the Gorilla
• What are YOUR main compliance obstacles?
1. Multiple Regulators – ASIC, Austrac, TPB, OAIC, ATO, SWA, FPA, AFA …
2. Voluminous requirements – 000s of pages of rules
3. Limited time to analyse and respond – so much white noise, plus, you have a business to run…
Fundamentals
• Risks you face: My guess of TOP TWO
• Being sued or taken to FOS or CIO – time, stress,
representation & opportunity costs, losing!!!
• Regulator at your door – complaint, random check –
time, stress, maybe a requisition or an EU …
Other risks• Internal fraud• Service delays that annoy clients• Technology failures that create chaos• Staffing problems – clashes, resignations, recruitment• Financial stress
• These are all real problems I have seen advisers trying to deal with over the last 26 years
• Each has a compliance dimension and could create problems for any AFSL
Then …
• All the other compliance stuff
• Registers – CPD, Breaches, Complaints …
• Manuals – Compliance, HR, Process
• Core disclosure documents – FSG, SOA, ROA, FDS, Opt In …
• Lodgements (AFSL Portal, ASIC Connect Portal, TPB, Austrac … and on
and on …)
Have I missed anything?
• Probably
• There’s obviously a lot to think about in the context of compliance risks
• The KEY is how we deal with them
Let’s look at ways to address these risks
Addressing these risks
• Litigation risk
• Systematisation – technology or sweat partner
• Insurance – PII with reasonable terms of cover
• Engagement with clients - education
Addressing these risks
• Regulator risk
• Be confident about your business
• Be patient in the face of ignorance
• Be aware of your rights
Other risks
• Internal fraud
• Segregate duties where possible
• Don’t over-rely on staff
• Keep checking transactions “at source”
• Have fraud cover along with your PII
Other risks
• Service delays – e.g. ROAs, execution hold ups
• Consider alternatives (MDA, SMA, MIS)
• Engage clients in technology solutions
• Monitor outcomes
Other risks
• Technology failures
• IT partnerships
• Redundancy assessments, DRP
• Cyber security measures, including insurance
Other risks
• Staffing
• Written engagement (with legal backup)
• Linkage to processes (KPIs, training)
• Termination protocols
Other risks
• Financial stress
• Awareness of RG166 and your AFSL conditions
• Regular preparation of BS, P&L and CFF
• Identify stress points (e.g. income risk areas)
Other other risks
• Compliance stuff
• CPD – Training Plan + CPD register (incl TPB)
• Manuals? – No Processes that are transparent? Yes
• FSG, SOA, ROA, FDS, Opt in – external review, “opt out”
• Lodgements – Portals for (i) ARs, (ii) FAs, (iii) RG166, (iv) Breaches and
(v) variations or RM changes.
Bigger picture – best approach
Settling on best approach/practice
• KEY ISSUES
• Client understanding
• Advice defensibility
• Back office administration efficiency
Client Understanding
• The key to reducing complaints
• Traditional - Seminars and other communications
• The Future – e.g. Informed Investor – a better way to limit liability?
• Client Engagement in the processes – not just passive
participation, active engagement
Client Understanding – the future
Client Understanding – the future
Client Understanding – the future
Advice defensibility
• Key elements
• KYC – objective and subjective data
• KYS – strategy reflects your competence
• BID – comfort around best interests
• Client understanding
Advice defensibility
• PII cover that is effective
• Understand what PI insurers HATE
• Get your broker to explain what you don’t understand in your policy – e.g. claims notification, APL maintenance
• Help your broker to be your advocate
Back office efficiency
• Automate Advice management systems
• Automate Client relationship management
• Automate compliance and risk management
• Interrogate your data to identify potential issues and opportunities
Client Understanding
• The Holy Grail?
• Literacy levels appalling – 50%+
• Lag to address significant – decades away
• Can it be addressed AT COAL FACE?
• Informed Consent is excellent insurance
Some parting thoughts
Give yourself an annual health check• DIY is fine but there are people who can help
• “Have I given any advice that doesn’t make me entirely comfortable – e.g. due to KYC or KYS concerns?”
• “Am I across my PII policy terms? Do I have a credible story to tell my broker so they can be my advocate at renewal?”
• “Have I identified key risks I face and put in place strategies to effectivelyminimise them?”
• “Can I delegate anything to others to reduce my time allocation to stuff that takes me away from my clients?”
• “Am I building something that is valuable because it is compliant and therefore worth paying a premium for?”
See if the regulator can help
Consider: What is best practice?
• I believe it = what is “most effective”
• Reflects high standards but also efficiency
• Client-centricity (engagement) reduces risk
• So should sensible automation of admin.
AFSLs and the 80/20 rule
• 80% of energy spent on what really counts
• Advice, strategy, engagement
• 20% of energy spent on what must be done
• CPD, Financials, Compliance and Risk Management
Summation
• Use your energy wisely
• Turn that Gorilla into a Chimp …
• Don’t let compliance drive you bananas!
Thank you! Questions?
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