Reflecting on ASIC deputy chairman Peter Kell’s warning to advisers to perform sound due diligence on third-party consultants, Pinnacle Practice director Anne Fuchs told ifa that the regulator does have a point.
“If advisers are looking to be seen as a profession then the third party consultants that support them also need to act like professionals and embody the behaviour that gives trust to consumers, so acting in the best interests of the clients,” Ms Fuchs said.
“Whether it’s fee for service consultants, whether it’s consultants that work with dealer groups, whether it is consultants that work in compliance, we all have to be striving for that best practice consumer trust so that we all get there in the end.”
In the past, some third party consultants working in the financial advice sector have helped foster a “numbers game” mentality whereby dealer group growth is the primary management focus of licensees, Ms Fuchs said, adding that responsible consultants need to realise “it’s about quality now, not quantity”.
Speaking at the AFA national conference in October, Mr Kell described third party research and compliance consultants as a “key risk” for advisers.
“This has come up quite a bit in our recent surveillance work … it is too often a source of problems for licensees,” he said. “It should be obvious that you can’t outsource your compliance [completely].”
Property referral partners are also an area PIAA believes Financial Planners need to review. Asking the right questions is vital for property referrals.
Is your referral partner acting in the clients best interests?
Referring to a listing agent, or someone who takes money from a listing agent is not compliant. How are you managing the conflict of interest?
Who is offering the advice?
If it comes from the listing agent then it is only a sales tool because they can’t act for both parties in the same transaction. Is the client receiving the services they need to make an informed decision?
Who holds the professional indemnity insurance for the advice?
Listing agents only hold PI for real estate transactions that by law cannot include advice. In the event of a claim how will you manage your reputation, especially if you are participating in fees?