Where the similarity between the disciplines becomes apparent is through what is required of every participant and what is left to the individual to interpret. For example, things like what key you’re in, what timing to use, note and rest values, and so on, are all non-negotiable directions for the musician. Other directions, for example the pause, which indicates to the musician that they can hold a note for as long as they wish, are guidelines.
Similar things are true in financial services. As non-negotiables, we have the laws that govern the industry, and guidelines like regulatory guides and past experience.
While the laws are clear and include The Corporations Act, Common Law – Equity and Fiduciary Duty, the guidelines leave a little more to the adviser’s discretion.
These guidelines include what I’d call ‘greatest hits’ like RG 175 but there are also some more obscure, or ‘B-Side’ tracks, including RG 36 that talks about when advice has actually been given.
Other guidelines include precedents. They were developed as part of the common law of Equity and are a major guiding factor in court rulings; once issued, they provide guidance for future occurrences. Think of precedents as the cover bands of financial services governance.
However, there are also some things which might straddle both non-negotiables and guidelines – the Code of Ethics in the manner it has been established, for example.
On the one hand, through its inclusion in the Corporations Act Section 921E – the Code of Ethics is non-negotiable, on the other, as a series of ethical standards, it’s a set of guidelines to be interpreted by advisers who come from different backgrounds with different experiences.
When thinking about compliance, there is room for interpretation, but advisers do need to be very careful.
Music is made up of both sounds and silences. What we need to remember is that where a silence might exist – that is, where legislation is not prescriptive – we don’t necessarily need to fill it with rules or regulations. We need to work with the silences we’re given to exercise our professional judgement and continue to work with government towards principles-based regulation.
It’s very important for financial advisers to get this right. If musicians ignore the non-negotiables, and are poor at interpreting the guidelines, the only consequence will be bad reviews; if advisers do the same, they will likely end up facing regulatory action or possibly the courts.
Phil Osborne, general manager, compliance, Synchron
Lawyers “don’t like” silences, they love them actually, as they can fill them with fear and strip away any confidence the advice industry may still have. They hate professional judgement because that dials them out of the game.
Plonking the Code of Ethics in Corps was a sad acknowledgement that the industry is a Pavlov’s Dog and there is nothing outside of Chapter 7. The call to remove Financial Services from the Corps Act is a good one, but the industry is on it’s knees, with no confidence or ability to think independently so we would expect (and therefore get) another prescriptive body of law, albeit as a stand-alone. The comment below about the musicians not being the industry architects/managers applies directly to financial services.
You can be as esoteric as you like but to channel your own analogy, the music industry which is filled with a plethora of characters from the ultra talented, gifted and professional classical composers and members of a symphonic orchestra to those hard working as independent buskers that belt out 3-chord rock melodies on the street for pennies and try to make their way. But they don’t define the structure of the industry. The one’s that do are the plethora of other players that don’t know a thing about music that say “you must do it like this”. So, without being too cute, yes, I could interpret the laws and regulations as loosely as I like to make it easier upon myself and aim to make the most amount of money from the least amount of effort but ASIC enforcement, PI insurers, bankers, AFCA and grubby, ambulance-chasing law firms are doing very well for themselves going after advisers who can’t evidence absolute compliance at every step of the advice process. Synchron is not the shining light in financial services compliance. Why don’t you invite the above-mentioned to have a thorough look at your advice process and if they think it works, we can all get on board?
Good article.
You’re playing my sort of tune.
Compliance in many areas is crucial to clients, advisers, dealers, regulators etc.
Easy Monitor might be the answer
Wondering whether the orchestra is in time with the synchron opus.