In March, ASIC announced it uncovered instances at the major advice institutions where auditors were failing to identify non-compliance and allowing rogue advisers to go undetected.
“It’s clear from this report that ASIC remains committed to improving the standard of financial advice within the industry, with a key focus on the execution of effective adviser audits,” KPMG said in a recent ‘insights’ article.
“However, conducting thorough and comprehensive financial adviser reviews can be complex and time consuming exercises for licensees, often testing the limits of existing resources and capabilities.”
KPMG said it believes licensees should be asking themselves a number of questions, including whether internal staff have sufficient experience and expertise to properly identify issues.
A positive trend, however, also noted in the report was the increasing use of data analytics in the development of Key Risk Indicators.
“The most common KRIs used as part of the institutions’ monitoring and supervision processes included: adviser audit ratings informing the level of risk, and accordingly, the frequency of audits; and the occurrence of potentially systematic issues identified by the adviser audit process,” KPMG said.
“Although still an emerging capability, ASIC believes that ‘the use of data analytics to develop KRIs is a useful and efficient method to improve the identification of high-risk advisers and non-compliant advice.”
Watch this space … non aligned / independent
Most dealer groups already have a good risk indicator for non compliant advice. It’s called “significantly above average new business revenue”. Sure, some advisers who generate a lot more new business than their dealer group peers are doing it in a perfectly compliant way. But many are doing it by dodgy practices. In the aligned dealer groups, these advisers are actually heroes not rogues.
Interesting perspective … what is significantly above average? is that the measure of dodgy advice ? Ie significantly above some average business revenue ? Hmm
Lets maybe reduce the SOA to two pages outlining the advice the product fee and the advisers fee ?everybody can understand it , maybe even the lawyers !!!
Did KPMG attach business cards to their self promotional article?
The issue in a Lot of case is that the auditor looks at a SOA from a compliance angle not to pull the SOA apart to ensure it is a competent plan based on clients risk ,age , investment experience etc- the 6 steps in Financial Planning. – STORM is a good example SOA tocked the audit boxes but did not suit a lot of clients.
There are many more practices out there which are undiscovered as to dodgy SOA’s
“Incidences at the Major Institutions” funny that! How a client is meant to comprehend a 120+ page SoA is beyond me, and the “major institutions” are to blame as they require 118 pages of standard wordings and appendices