Have you been putting off having your first compliance review and rationalising this with comments such as:
- I am waiting for a manual from my aligned product supplier so I can see what I need to do
- My QFE compliance manager has not yet scheduled a review meeting with me
- I reckon I am already compliant so no need to worry
- The FMA hasn’t pinged anyone yet and they are being really helpful so I should be fine as there are heaps of advisers out there not as professional as I am.
If you are an AFA then these sorts of comments will not provide you with any protection. As an AFA you are responsible for ensuring you are compliant all of the time. If you are not compliant then your Standard Conditions of Authorisation require you to notify the FMA within five business days of any significant matter concerning your authorisation or financial adviser activities. Your ABS may outline how your compliance process operates and it is important this is followed. If not, alter your ABS to reflect the true process and not the template process you may have followed to initially draft your ABS. Strategi can assist in preparing or reviewing your ABS.
As an AFA, or as a professional RFA, you want to know that what you do is compliant with relevant legislation and regulation so you have the best chance of defending yourself in the event of a client complaint going to your DRS, the regulator, or to court.
Your AFA obligations over-ride any contract arrangement you have in place. If you are an AFA within a QFE, or you have some form of review service provided to you by a third party, then it is your responsibility to ensure you get your review(s) undertaken as soon as possible. Be pro-active and ask for the review. As an AFA or a professional RFA, you want to know your compliance status. A compliance review and subsequent Risk Management plan such as that produced by Strategi will enable you to have a process in place to ensure you achieve your compliant status sooner rather than later.
It is better to know upfront that you are not compliant and have a process and time line in place to rectify the situation, rather than sit back thinking that all is fine and being unaware that you may actually be non-compliant.
Consider the following 7 benefits of organising a compliance review sooner rather than later:
- Reduces the potential for penalties and unfavourable DRS determinations by increasing the likelihood that your business is compliant or has a roadmap in place to quickly become compliant.
- Reduces the possibility that you are inadvertently creating a larger contingent liability of non- compliant advice. The earlier the issues can be identified, then the fewer client files that need to be gone back through and the processes rectified.
- Potentially identifies business improvements which may improve your productivity, increase revenue and reduce mistakes. The risk management plan could mean more profit for you and your business.
- Improves the capital value of your business as a purchaser will only consider paying top dollar if the business is compliant.
- Identifies opportunities to improve your client service proposition resulting in more referrals, more revenue per existing client and improved business profit.
- Gives you another opportunity to differentiate yourself from competitors and promote yourself to existing clients and referral sources. Not all financial advisers will voluntarily submit their business to external compliance reviews to ensure that the business is not only compliant with the minimum regulations but is also compliant with world- wide industry best practices.
- Reduces stress levels for you and your staff as the review can identify ways to streamline the business, reduce mistakes and free up time to better spend building and maintaining client relationships.
A compliance review may potentially save you and make you money. Consider it as part of your annual or six monthly marketing, PI cover, CPD and up-skilling expenditure. Regard it as being an investment in your normal business operation rather than an additional expense that you begrudge paying. The cost of a compliance review will likely be a fraction of the cost of a penalty, fine or determination against you, and has potential benefits that will add to your bottom line.
