5 Tips to stop you getting hammered!
Compliance

5 Tips to stop you getting hammered!

March 13, 2013

by Tony Vidler

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As financial advisers get to grips with new regulation, rule changes and evolving best practice advice standards they are often losing sight of some commercial reality.

All too often I encounter advisers who have themselves been advised by an “expert” of one sort or another that they have serious business issues…or worse: serious compliance issues that can stop their business overnight!

Fortunately for the financial adviser it just so happens that the doomsayer also happens to be the solutions provider and can fix the very problem identified.

Phew!

That was lucky wasn’t it?

Part of our evolution as a profession is the need to gain commercial maturity – and in general terms it seems we have a way to go in that respect too.  As a breed, financial advisers are often remarkably trusting creatures. They tend to think that because they must be transparent in their business dealings and overtly manage conflicts of interest it must follow that other businesses act the same way.

Well unfortunately it just doesn’t work quite that way a lot of the time.

I am not naive enough to think that merely writing a single blog post is going to change the dubious promotional and business acquisition tactics of some service suppliers to financial advisory practices.  Not a thing will change there.

However, it IS possible that some financial advisers reading this will understand the Golden Hammer Rule:

GoldenHammer

When you ask the business advice of a person with a Golden Hammer, they will treat you like another gold-tipped nail.  You are there for the banging basically.

This is especially problematic in the compliance area given the combination of relatively high adviser uncertainty; fear of the consequences of non-compliance; the lack of specific practical guidance in many instances from market regulators themselves; and the usual SME business structure of most advisers businesses (time & resource poor).

Or, to put it in very simple terms; it is an area where there are lots of small business owners frantically running to stand still in their business in any given week, who try to do the right thing but always have a lingering doubt over whether they did in fact get it right….they are there for the banging.

My top 5 tips for financial advisers obtaining external advice (especially advice that they often didn’t seek to begin with):

  • Ask the service provider to engage in a disclosure proces with you.  Why shouldn’t you know who owns it, makes money from it, and what it is they do that makes them money?
  • Ask the service provider directly about conflicts of interest, and their processes for managing or negating such conflicts.  You then need to satisfy yourself that any “chinese walls” type conflict-management approach is substantive and meaningful.
  • Ask the service provider to provide a percentage breakdown of their revenue sources.  If for instance a business offering audit services actually generated 80% of its business revenue from selling compliance solutions, then I am going to take their independent audit service with a rather large chunk of rock salt.
  • Ask the service provider to suggest other (third party) solution providers to any problems uncovered.  Then go and talk to those other solution providers.
  • and finally….if the service provider doesn’t wish to be transparent with you in accordance with the 4 tips outlined above, then don’t deal with them.

Good professional financial advisers have a moral right to expect those they choose to work with to operate to the same high standards of transparency.

Demand it of them.

Disclosure of interest:  None. Strictly Business does provide some financial adviser compliance material on a complimentary basis via its website – it is available for any adviser with access to a computer and the internet at no charge.  Compliance checking services or auditing processes are not core business, nor does the company advertise for or seek that type of work.

© 2013 Tony Vidler.  All rights reserved. All materials contained on this web site not otherwise subject to copyright of other parties are subject to the ownership rights of Tony Vidler.  Tony Vidler authorises you to make a single copy of the content herein for your own personal, non-commercial, use while visiting the site. You agree that any copy made must include the Tony Vidler copyright notice in full. No other permission is granted to you to print, copy, reproduce, distribute, transmit, upload, download, store, display in public, alter, or modify the content contained on this web site.

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