Food for thought on compliance and engagement tools

When it comes to AFSL compliance and tools to assist with it, the client conversation is paramount. 

If you want to capture the hearts and minds of consumers in 2017, having a tool that does this as part of your offering not only makes sense but is essential.

As an AFSL, ASIC has responsibility and oversight on ensuring that licensees comply with most of the general obligations under s912A(1) of the Corporations Act 2001. Specifically, ASIC’s regulatory guides provide guidance to what is required of an AFSL across a wide range of areas including, but not limited to, compliance, risk management, people, reporting, technology and dispute resolution.

In the current climate, much focus has been on whether or not the consumer, the financial planning or personal risk insurance client actually understood the advice that was provided. Many of the issues and complaints come from the identification that AFSLs have fallen short in the areas of:

1) AFSLs having adequate financial, technological and human resources to allow them to carry out supervisory arrangements (s912A(1)(d));

2) Being able to demonstrate that the steps, which act as a ‘safe harbour’ for complying with the best interests duty, (set out in s961B(2)) have been followed by representatives;


3) Being able to demonstrate that and appropriate warning was given to the client if advice is based on incomplete or inaccurate information (s961H), and that the client was cognisant of the ramifications of that warning; and

4) That clients had an understanding of the financial documents provided to them. These include but are not limited to:

a) An FSG (RG 168.19–RG 168.25);

b) An SOA (RG 168.26–RG 168.35); and

c) A PDS (RG 168.36–RG 168.54).

For all of these situations the AFSL relies upon, for the most part, an adviser’s file notes, written or electronic, that often simply record the scope of advice and dates when certain documents were provided. 

You do not need to reach for case law to demonstrate that AFSLs and advisers have failed these basic tests of whether or not a consumer understands the advice being provided. Many of these cases do not get to court because they are easily dealt with (in the matter of a decision-making process) by FOS. 

A notable example provided by FOS shows, that despite an SOA being prepared, how inadequate an AFSL process was.

  • The customer accepted the advice and made the recommended investment. The investment performed badly and suffered significant losses. The customer lodged a dispute with FOS, claiming she did not understand the advice provided to her and the managed growth fund was not an appropriate investment in her circumstances;
  • It was found that the customer was inexperienced in financial matters and had very limited knowledge of financial markets and products;
  • The information in the SOA about capital volatility associated with the managed investment was generic in nature and was not likely to alert the customer to the potential for capital loss; and
  • It was found that if the SOA had been expressed in language the customer was likely to understand, she would not have made the investment. It was ordered that the adviser pay compensation to the client.

What was wrong with the SOA? What were the steps followed to meet best interests duty? How was this documented?

The answer is the SOA was not dissimilar to those produced every day. The documentation were file notes and a fact find. The documents were the PDS and the SOA. What is missing?

What is missing is the rich record of conversation between the client and adviser. What is missing is the explanation and recording of goals and objectives that could be viewed over and over again to ensure that both the client and adviser were on the same page. When the SOA was presented, where is the evidence of the relevant parts of the SOA (what is being recommended and why it meets the original goals) were not only discussed but understood?

As an AFSL, the tools provided to an adviser or mandated for use are tools such as financial planning software and CRMs that record the advice journey of the client. However, these are adviser tools under the adviser control where the inputs are decidedly one sided. They assist the adviser for efficiency. They do not enhance the client experience. They do not reduce the risk of the case as above. 

AFSLs meeting the obligations of holding a licence and supervising and monitoring their representatives need something that documents the voice of the customer. This voice is given volume during the most critical parts of the advice process:

  1. The goals of the client in seeking advice;
  2. What the adviser says in relation to those goals;
  3. The suggested options for the client;
  4. What their level of understanding is;
  5. What is agreed upon; and
  6. The client understands the consequences of implementing the advice.

If your representatives document these discussions, illuminating which concepts were discussed and what tools, collateral and conversations were used to get to the point of agreement by the client on the course of action, would you as an AFSL think this is a good idea?

If you want to capture the hearts and minds of consumers in 2017, to promote your brand in a positive way, to provide a process that leads to informed consent, to protect your adviser’s representatives but also allow them to deliver engaging, efficient and compliant advice, then having a tool that does this as part of your offering not only makes sense but is an essential tool. 

How easy would it be to provide that tool as part of your dealer services? The answer is very easy, and at a cost per head that would represent less than 3 per cent of typical dealer fees that advisers pay. 

For such a small cost, how can you not provide yourself and your advice representatives with that protection? Most of all, the people you will be protecting and delivering a world-class experience to will be the end consumer. And without them, you don’t have a business.

Andy Marshall is the regional sales manager APAC of SuiteBox Solutions

Food for thought on compliance and engagement tools
Andy Marshall
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