Driving your business further

So, you’ve put in all the hard yards, done the training (RG 146), got your licence (Australian Financial Services Licence [ASFL] or authorisation) and now all you want to do is take your vehicle (your financial services business) for a drive, right?

That means telling people all about your business. You head out on the road, armed with all your up-to-date maps (that is, your sales, marketing and promotional plans) showing you precisely where you are going to find those new clients. Pumped, you are ready to tell all and sundry about how fantastic you and your products and services are. Your maps tell you that you need to do some advertising and a lot of direct mail to get to the treasure.

But as soon as you head out on the road to put your spiffy new marketing and promotional plans into action you notice your car slows down. Progress is slow, something seems to be stifling you.

You look around to see what the problem is. What you find is several uninvited passengers in the car with you. All seem to have their hands on your steering wheel, pointing you down their favourite road, not yours.

You notice product and marketing have their foot on the accelerator screaming ‘go faster, faster, faster’. But they aren’t the only passengers. There are some folks in the back you don’t even recognise (administration and IT).

Legal seem to have their foot on the brake saying, ‘you can’t drive like that’, and compliance have their foot on the clutch and seem to be saying something like, ‘It’s okay to go out and drive but you need to be careful out there. You need to abide by the road rules and also look out for those bumpy and winding roads.’

And, of course, just around the corner waiting for you to make a wrong turn is the police (that is, the Australian Securities and Investments Commission [ASIC]), ready to write you a ticket or cancel your licence.

The end result is that you just seem to sit there revving your engine, going nowhere fast. Sound familiar?

Whether you are a small financial planning firm or a large multinational, marketing due diligence need not be a handbrake to progress.

In our experience, marketing due diligence procedures are one of the most hotly contested areas of operation within a financial services business, because while marketing is where you get to ‘put the rubber to the road’, it is also an activity that can get you into strife.

So, how do you ensure your marketing due diligence procedures help your business go places, not just sit in the garage looking pretty? Here’s some valuable lessons we have learned from dealing with many varied businesses about getting due diligence to really work for your marketing activities.

1. Get the context right

Remember, there are good reasons why you can’t just rush out telling anyone and everyone about your offerings in anyway you want.

For example, the misleading and deceptive conduct provisions of the Trade Practices Act (and ASIC Act for financial services) are some of the most litigated sections in Australia.

ASIC is charged with protecting consumers so they are not misled or ripped off. Quite rightly, they take their job seriously, and the financial services field is littered with the carcasses of many, many misleading and deceptive ads, promotions, sales activities and the like.

As a result, licensees have faced bans and/or enforceable undertakings, which effective due diligence procedures could have avoided.

Some level of due diligence is not only required in your business but is also good business practice.

But I hear you ask, ‘I just want to write a simple letter to my clients. Why do I have to put that through due diligence?’

Our legal and regulatory obligations are so numerous you can’t be an expert in all areas. That is where other people in your business, such as product, marketing, research, legal and compliance (who have the necessary skills and knowledge between them) come in.

There are so many ways you can trip yourself up without due diligence as a safety net to catch you. For example: you might unwittingly be making a representation about a future matter for which you have no reasonable basis; you could be making a promise you can’t keep; you may make a claim that can’t be substantiated; you may forget a general advice warning or other disclosure; or you could omit particular information that you’re required to include.

Comparisons in promotional material are particularly fraught; performance numbers require a great deal of accuracy and certain disclosure, privacy and spam requirements need to be considered and adhered to.

Effective due diligence will help you navigate your way through the minefield.

So, having seen the sense in due diligence, how do you ensure that it helps your marketing activities rather than put the handbrake on?

2. Develop policy and procedures that fit your business

Whether you are a one-man band adviser or a large, sophisticated financial services operator, you need due diligence procedures that fit your business. Even small advisory practices usually have some requirement to involve the licensee in the sign-off of their marketing activities.

Clearly, a small business would not need the level of detail in its procedures, nor the number of stakeholders that need to be involved in each communication piece that a large, complex multinational needs.

You should include the responsibilities and expectations of each stakeholder, as well as timeframes for delivery. You may want to develop a sign-off sheet so that the due diligence owner can ensure that all relevant stakeholders have been included and signed off the document. Also consider including consequences and escalation processes where stakeholders do not meet required timeframes.

Some firms have even developed key performance indicators for staff involved in the due diligence process.

Put some thought into what will work best for your business considering any system, software, geographical or other limitations you may have.

For example, do you send a document to several stakeholders simultaneously, or do you stagger this? Do you use a Word document that can be marked up with tracked changes, or do you have some other type of document system such as XML?

In any case, it is advisable to detail in your procedures how you expect stakeholders to provide their feedback.

Some principles, such as ensuring legal and compliance review the communication piece (prior to it being sent or published) and keeping adequate records will be the same no matter what size, complexity or type of business. But the details need to be appropriate for your business.

3. Tell people about it

Once you have designed an appropriate policy and procedures for your business (in conjunction with vital stakeholders in your business of course), tell people about it.

Run training sessions on due diligence generally and also on the requirements of the policy and procedures. This will help staff understand what is required of them.

4. Create a list of all the different types of documents your business produces

Once you have a comprehensive list, work out who the stakeholders are with each. For example, IT may only need to be involved in communications that promise anything IT needs to deliver. Research and analytics would only need to be involved in communications that include some performance numbers or commentary on certain investments.

You may even want to divide documents into different categories, where Category A documents are required disclosure documents, Category B documents are general marketing documents and so on.

You may need different stakeholders, processes and timeframes for each category (for example, disclosure documents may need the board’s sign-off).

5. Ensure someone owns the process and drives it

One of the biggest complaints we hear about due diligence is that it takes too long to get documents signed off. One of the reasons for this is that often nobody ‘owns’ the procedure. As no-one owns it, no-one will take responsibility for co-ordinating all the stakeholders, ensuring all feedback is incorporated into the document (where relevant) and making sure that documents are signed-off within the required timeframe.

Whether it is someone in product, marketing or any other area of your business, the due diligence owner should be a ‘detail’ person who is able to track through all required changes to a document and incorporate them all (a good tip is to highlight every required change and tick them off when done). The owner should also be in a position to co-ordinate and communicate effectively with all stakeholders.

Your procedure may require that a different person or department is responsible for different types of documents or communication materials.

Whatever the case, ensure that the owner introduces themselves to stakeholders as such so that all communications can have a focal point and someone to take responsibility for progressing the document through the process.

6. Use a communications register

If you have a fair volume of marketing materials, create a central register, which the document owner/s update as required.

The register should record the name and, we suggest, a number for each document that undergoes due diligence.

Using a common name and number can be of enormous help, especially in larger organisations that produce numerous documents, so that all stakeholders know which document is being referred to at any point in time. It can be particularly useful if stakeholders use the document name and/or number in the subject line of all e-mails about the particular document.

Other details that should be maintained on the register include: the owner; the type of document; the start date of due diligence and the end date.

As well as the communications register, the owner should keep comprehensive records (paper and/or electronic) of each stakeholder’s feedback so that if required you can produce all relevant records and effectively reconstruct the process that resulted in the final document being produced in the way it was. This will help you meet your record keeping requirements under the law.

If you don’t have too much marketing material, a simple ring binder with copies that include a sign-off cover sheet should suffice.

7. Allocate responsibilities to different people/departments

Everyone wants to be a writer. Budding authors and editors love nothing more than getting the red pen out and re-crafting your words because, well, just because they think it reads better. This is one of the biggest bugbears with due diligence.

However, if you clearly allocate responsibilities you can largely avoid this annoying and time-consuming problem. Your procedures should limit particular stakeholders to their area of expertise. For example, research verifies numbers and comments about investment performance; product vouch for product features and benefits; marketing is responsible for the overall message and tone as well as spelling and grammar; administration confirm that processes work to deliver as promised; legal input any legal requirements; and compliance check to ensure the piece complies with all requirements.

Also, if you ask stakeholders to include a brief explanation of their feedback, this can really help the owner determine the relative importance of suggested changes.

If feedback is outside a person’s area of expertise the owner does not need to accept it, unless they happen to highlight a big problem that no-one else has highlighted yet. In such cases, questions should be asked of the area that should have known.

8. Make sure each document is as ‘near perfect’ as possible before you start due diligence

There’s nothing more frustrating than receiving a document for due diligence that has clearly not been planned and developed properly or is in a state of disrepair. Lawyers can be especially tetchy about this.

Once a document is in the due diligence process your procedures should ensure reviews are kept to two rounds. For some documents, one round of due diligence should be enough.

We recommend that legal and compliance be the last stakeholders to review and sign off any documents. That means once the final sign-off is received, no further changes should be made.

9. Review your procedures regularly

Engage regularly with staff and seek their thoughts and input on how the procedures are working. Don’t be afraid to change your procedures if it means a better, more efficient process.

If you do all of the above, you should have an effective, efficient due diligence system. It won’t guarantee you don’t have road bumps along the way, but it will definitely help you get your business to where you want it to go more efficiently, with less angst, less risk and without fines or loss of licence. And you’ll even end up with some well-written communication materials to boot.

Happy driving.

I have provided a simple promotional material checklist you could adapt for your business (see breakout box).

Ian McDermott is a lawyer with Holley Nethercote CommercialLawyers , dealing mainly in financial services law. He is also a compliance consultant with the firm’s related compliance business, Compact — Compliance & Corporate Training. In a previous life, Ian was a PR and marketing consultant.