While the first legislative hurdle for advisers has been passed, amendments to the Financial Markets Conduct Act are on the horizon - and although they primarily target banks and insurers, intermediaries are currently also included.
Strategi Group managing director David Greenslade said that the COFI changes might look like “scary stuff” to the adviser sector, but he noted that the law actually offers “heaps of wiggle room”, including room to add digital or robo-advice into your offering.
He also said that although many businesses will likely be tempted to add more steps to their advice process, this should not be the way to go.
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“As well as working on the compliance and training side at Strategi Group, I’m also a practicing financial adviser, and I still look after clients,” Greenslade commented.
“So, I understand the pain that financial advisers are going through when they go through the process of re-engineering their business to get things like compliant documents.”
“A lot of people are looking at the Financial Markets Conduct Act and thinking ‘wow, that’s pretty scary stuff’ as there are bigger penalties and more obligations, and so they’re thinking that they should put more stuff into their advice process,” he continued.
“Sadly, what we’re seeing is people taking existing advice processes and adding more paper and client sign-offs, and that’s really counter to the purpose around the regime.”
Greenslade said that the amendment bill has two key aims, and these are often overlooked by advisers and firms who feel that the new obligations will hold them back
He said the best strategy was to get to grips with the new parameters, and work out how best to “deploy” the flexibility they offer to give clients the best possible outcome.
“The first key aim is to avoid unnecessary compliance costs,” Greenslade said.
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“Within a business those costs will go up, but that doesn’t mean to say that we need to make the advice process more complex for our clients. The second purpose is to promote innovation and flexibility in the financial markets, as it is designed for the delivery of both digital advice and human advice. So, we need to be thinking about flexibility, because this legislation actually encourages us to do that and it provides the flexibility for us to do it.”
“Where people are saying that the law is still defying them and holding them back - it’s actually the reverse,” he added.
“It’s our mindset around how we’re approaching this that’s holding us back - the law is actually giving us heaps of wiggle room. We just need to understand how much of that wiggle room we have, and how we can best deploy that to get good customer outcomes.”