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Financial Services Compliance: Save or Spend?

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Zoe Higgins Special Counsel Linkedin

When new clients are looking to engage us for the first time, they sometimes ask us for recommendations on what our first task should be.

This is obviously more likely to happen where a business doesn’t already have a regulatory fire that needs to be put out.  Here, the client basically wants to know what external compliance services we think offer the most value – what is going to give the most impactful return for the compliance spend?

We field this question semi-regularly, so we’ve set out a few thoughts on the compliance areas your business should spend on, and a couple of areas in which you could save.  [We also can’t help but point out a possible causal relationship between 1. proactively investing in compliance and 2. a lower probability that your first contact with a law firm will be a desperate call for help with a regulatory emergency.]

Spend: licensee compliance reviews  

Routine internal reviews have their place, particularly in the AFSL compliance ecosystem.  However, bringing in a third party for a licensee review really offers a fresh set of eyes.  What policies and procedures do you have that need revision but survive intact because they have ‘always been done this way’?  Might you have over (or under) cooked your response to major regulatory changes?  An external third party reviewer can quickly flag these things and give a steer in the right direction.

Spend: investigation and remediation planning

If you find a serious regulatory compliance problem in your business, it’s important to act fast.  You don’t necessarily need to pay someone to conduct an entire investigation or to see a remediation plan through to completion.  We think it’s much more important to involve a third party in reviewing your plan at the outset.

External feedback will help ensure your intended approach to investigation and remediation covers all the relevant issues and meets ASIC’s overall expectations.  It will also reduce the likelihood of having to change (or repeat) the investigation and remediation steps after you have started.

Spend then save: AFSL licensing

Before you apply for or vary an AFSL, we recommend you make an initial outlay of time and money for licensing advice.  After all, what use is an AFSL with the wrong authorisations?  The upfront investment will help protect your business in the longer term.

Once you have obtained some initial advice, you will have a roadmap for the way forward, and you can choose a thrifty DIY route to your licensing application.  (Or we can project manage the application for you.)

Save: AFCA complaints

At least some complaints that could be excluded from AFCA’s jurisdiction at an early stage will be allowed to snowball through increasingly expensive levels of the case management process.  You may be able to save considerable amounts of money just by sitting down and checking the complaint against the AFCA rules.  We regularly help our clients in this area by drafting or reviewing requests for AFCA to exclude complaints.

Spend then save: advice reviews

We have reviewed many, many Statement of Advice documents for our clients.  We often do this in order to provide a view about whether advisers demonstrated compliance with the best interests obligations.  Usually, a strong pattern will emerge after we have reviewed around 10 or 20 advice files.

In our experience, the issues identified in a relatively small sample of files are also very likely to play out across a much larger number of files prepared by the same advisers or within the same business.  This means we think our clients can be efficient with their compliance spend by asking us for our ‘second opinion’ in relation to a relatively small sample of files, and then leveraging the results to:

  1. boost their ongoing internal reviews (e.g. by changing the interpretation of relevant regulatory requirements, or adding additional items to vetting checklists); and
  2. Identify areas in which advisers may require targeted training.

Spend then save: compliance support

We know how important it is to get it right the first time, so we emphasise spending on your compliance to save you from the timely and costly process of fixing issues down the track.  That’s why we’ve developed an online compliance portal called the HN Hub to assist compliance staff of licensees to stay on top of their regulatory obligations.  The HN Hub is a cost effective compliance solution that has your training and compliance documents all in the one place.  Speak to one of our HN Hub team members to discuss the different package options available and which one would be right for you.

Author: Zoe Higgins (Special Counsel)