Prevet is not a dirty word

Drawing inspiration from the ’80s

For those of you who are little more vintage in age (like me), the band “The Skyhooks” once said “Ego is not a dirty word”.

When it comes to the financial advice industry, “Prevet is not a dirty word“.  Pre-vetting advice; reviewing advice before it’s presented to a client; quality assurance of advice … whatever you want to call it, just makes sense.

The market-leading, forward thinking licensees and advice practices have moved, or are moving, to 100% prevet of all SOAs.  The technology already exists to make this a reality. The days of waiting 1-2 weeks for licensee prevet turnarounds are gone

s912A states: “(1) A financial services licensee must:

(a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly;

(d) have available adequate resources (including financial, technological and human resources) to provide the financial services covered by the licence and to carry out supervisory arrangements; &

(h) have adequate risk management systems.”

What does this mean?

The idea that a licensee, in 2022, can still operate a backward looking, random selection of only a small percentage of any individual finanical adviser’s advice to retail clients is unacceptable.

The Courts and ASIC have made it clear – licensees are responsible for overseeing the quality of advice provided by their Financial Advisers. The traditional “backward” looking audit program is no longer fit for purpose.   As the industry moves to a profession, so too compliance must become agile, proactive, and forward looking.

Genuine advice oversight leads to mitigating financial risks associated with breach reporting and general licensee obligations, which benefits everyone – the licensee, the adviser, and the client.

Licensees and advisers need to get ahead of the curve and enforce business processes that check the quality of the advice before it is presented to the client.  It’s not a sign of weakness – it’s a sign of professionalism.

How does Fourth Line help?

Fourth Line’s Quality Advice and Risk Management (QARM) system identifies advice related issues before they become unavoidable problems. By interrogating the advice at the point of creation (before the SOA is presented), issues are fixed, problems are avoided, and breaches averted. This builds trust with clients, enhances the reputation of the advice firm, and avoids costly client remediation programs.

Importantly, Fourth Line complements existing compliance frameworks. For licensees who have a multipronged regime, Fourth Line enables licensees to “scale up” client file reviews under traditional backward-looking audit programs or, similarly, implement critical “due diligence” advice analysis when considering the appointment of new advisers.

Compliance is dead; long live Client Engagement!

The word “compliance” should be dropped from the vernacular of the financial advice industry.

The focus is really about client engagement, trust, and relationships.  The word “compliance” should be replaced by the concept of doing the right thing by clients to build trust and deepen the relationship.  By doing the “right thing”, our conscience and moral compass drives our personal and professional economic engines.

Want to know an interesting & amazing fact?

s961B, G, H, & J of the Corporations Act can only be breached, and problems created, at the point when the Statement of Advice (SOA) is presented to the client.

Right up until that point of presentation, any issues are fixable, problems are avoidable, and breaches are avertible.

How do you avoid problems and breaches?

PREVET 100% of all advice provided to retail clients.

How can you do this at scale?

Use technology such as the Fourth Line Quality Advice and Risk Management platform.

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Fourth Line is a rigorous RegTech risk management and compliance system for advice practices, dealer groups and other wealth management participants. Fourth Line uses algorithmic approaches to simplify the complexity in advice reviews whilst maintaining human oversight, empowering compliance teams to coach and develop strong advice behaviors through data driven insights from advanced analytics for adviser, practice/dealer group and industry benchmark comparison with centralised document storage and access to meet regulatory needs. 

For information email: info@fourth-line.com.au