Volatile markets put compliance to the test

Market corrections this year may expose inadequacies in the financial services’ compliance system, particularly in the critical area of investor protection, according to former Perpetual Trustees managing director Graham Bradley.

While financial advisers would appear to be protected by the compliance regime, there was a question mark over the protection it offered to investors, Bradley said.

“It would seem to an outside observer that advisers who follow procedures and maintain the right paperwork and provide the right boilerplate template are fairly well protected.

“But are investors really well informed? And is their money better protected?”

He said the strength of regulatory changes made so far in the sector had “not been fully tested, but I fear it will be very soon, and found wanting”.

“While buoyant markets in recent times mean that industry participants have been dealing from a position of strength, this year is likely to be very different.”

Bradley said there appears to be a need for the financial services industry to ensure their interests are realigned with the interests of investors.

“A priority is to ensure genuine transparency in the sector, not boilerplate disclosure, particularly about risk and risk management.

“Entrenched self-serving practices and attitudes that continue to provide high fees or commissions for managers and advisers are particularly difficult to justify when investors are suffering losses.”