Compliance standards under scrutiny
BT Financial Group general manager of advice, Mark Spiers (pictured), has canvassed the concepts of an adviser register and industry-wide standardised compliance audit procedures as safeguards against rogue advisers.
There have been numerous instances where advisers rejected by one dealer group have soon surfaced at another, with little or no attention paid by the new licensee to the adviser’s compliance record. Spiers described the attention paid to reference checking in the financial advice industry as widely variable.
Some dealer groups are scrupulous, some outsource compliance and reference checks to third parties and others fail to conduct any due diligence at all, Spiers said. In those instances, “the Svengali, the charismatic person comes in with the CFP and says the right things, looks great, and they’re accepted prima facie”.
Even where a recruiting licensee does seek an adviser’s record, Spiers acknowledged there was great variability in compliance standards across the industry, with the “depth and detail” of adviser audits determined differently by every licensee.
“Somebody could be three gold stars in one dealer group and fail or be one gold star in another,” Spiers said.
This is problematic in instances where some licensees pay as much attention to adviser adherence to brand and marketing requirements as the advice given. Spiers questioned whether it was time for the industry to consider the introduction of a common compliance audit standard for advice.
Spiers raised the concept of a “uniform standard” for those conducting compliance audits in advice firms, requiring them to adhere to an agreed code or best practice framework. Spiers pointed to similar standards employed in the accounting and auditing professions as examples.
“A common audit standard code would ensure that the rating the planner was given was ascribed by the accepted industry standard,” Spiers said.
Given the current variability in compliance standards and reference checking across the industry, Spiers also raised the concept of the introduction of an adviser compliance register to enable prospective employers and/or consumers to better conduct due diligence on advisers.
Information that could potentially be included on an adviser register could include a compliance record, the number of licensees an adviser has worked for, and whether or not they are a member of a professional association. Much like a credit rating, having a compliance record may “encourage good behaviour”, Spiers said, while also potentially boosting consumer confidence in the industry.
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