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Over the last few years the whole issue of compliance has been discussed ad-nauseam to the point that a lot of brokers are starting to think it will just never happen.
The reality is that it could happen very quickly, many more financial failures of the likes of Hanover and other finance companies could result in a knee jerk reaction from our politician’s in an election year. They know that they are looking bad about seeing Mums and Dads losing their money, and may just rush through some form of compliance legislation, just to show they can do something!
Unfortunately they are not likely to use all of the information that they have garnered over the last four years of consultation, meetings and analysis. Rather they will plunge ahead with a model that can be implemented quickly and that will throw a very broad umbrella over the term ‘financial advice’.
But wait, there is more! Those businesses around the world that look forward to compliance have done extremely well once its introduced. Let’s face it; the fundamentals of compliance are very simple. In a nutshell they are
1. Know your product
2. Know your customer
3. Prove the logic by which you gave advice
4. Keep good paper trails on all the above!!!
That’s not so hard is it?
Where the treasure lies is in the files. No matter how disciplined we are, and no matter how proud we may be of our professional competence, the reality of life is that familiarity breeds contempt. What I mean is that no matter how hard we try, when we have been servicing the same customers for many years, we unfortunately sometimes forget to go right back to basics and make sure that we have understood all their issues.
Let me give you an example of a friend of mine, in Australia. With the introduction of a fully compliant regime, he deemed it wise to go back to all his clients, and to review their portfolio of risks and covers, from scratch.
Previous to that the reviews tended to be based around what ever changes had occurred in the business since the previous review, and often didn’t take very long, since they only dealt with the variables.
The way he explained the new process to his clients was that under new regulations he was required to up-date all of his information about them and their business, and although it would be time consuming it was an essential part of him continuing with his licence. To his pleasure and surprise, by going right back to fundamentals he uncovered a treasure trove of new opportunities amongst his existing clients. In addition, he obtained plenty of referrals, as his clients were actually happy to see how thorough and detailed he was being in the process.
A further bonus was that in the process of ’getting to know his client’ he uncovered many other opportunities for related business. Investment advice, life insurance, mortgage and finance broking etc. Although you may choose not to operate in these areas, particularly with the necessity of qualified and competent staff to deal with them, no doubt you will have referral opportunities to other professionals. After all, it is much better that your client goes to somebody you trust and respect, rather than somebody who won’t do the job as well as you do.
So although the specific requirements of a compliant resume are not yet obvious, it would not be hard to imagine what they would be. If our government is going to bring something in a hurry it is very likely to look similar to the regime across the Tasman. Indeed the about face from the APBs in favour of a single Government controlled regulator will be a good indication that sometime soon we will have something that looks Australian, but with those little tweaks that we always like to see in a kiwi product.
Another advantage of a fully compliant resume, is that it encourages process, a number of organisations like Advisernet are marketing a back office process, which apart from increasing profits through a better allocation of resources, also enforces a disciplined approach.
Younger staff, perhaps not as well qualified and experienced as you would like them to be, still will have to look after many clients. We all know that with very few new brokers coming on stream over the last twenty years, very experienced and competent people are in high demand and may not be available to you at an affordable price. By using a good back office system, which forces your junior staff to follow a process and a tick list, and also gives you overview from a computer point of view of the work that they are doing, makes good sense. To be fully compliant that’s the type of system you are going to need anyway, so it may be in your interest to get in first. If you can visualise the small fortune that exists in your filing cabinet, then perhaps the one impediment to digging it out, is simply time and man power. A business that works on a rigorous back office can probably slice and dice its customer base and allocate people with various levels of experience and competence to deal with the appropriate clients.
So what do we need to take advantage of this opportunity?
1. A positive attitude, indeed embracing the idea of compliance as being a profitable and professional way for the future.
2. A very well organised computer based back office that ensures that all levels of staff can deal with clients, records are accurately kept, and all questions are needed to be answered in some form or another.
3. An investment now in 1 and 2 above, don’t wait until the compliance genie pops out of the magic bottle, as there will be a mad scramble to play catch up. All changes take a little time to bed in; you want to be doing this at the timing of your choice not to meet the requirements of some regulator.
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