Futuro Financial Services
Partners in Investment and Growth
ABN 30 085 870 015 AFSL 238478
Compliance
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July 2014
Paul Kelly and Christopher Hirst
Adviser Network Meeting
Agenda
Re-engineering the advice process: Project
management approach
• Risk Profiling: Buckets of money approach to asset
allocation
• Sterling update
• Are you giving Credit Advice
• Complaints: avoidance
• CPD Training/Accreditation in the new world
• Obligations of a CAR for FOFA
• Adviser profiles
• POA Executors
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Project Management
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What is Financial Planning
How to Be a Successful Adviser
Client Engagement
Advice Formulation
Advice Presentation
Advice Implementation
Ongoing Advice and Service
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Project Management
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Project Management
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Risk Profiling
• Buckets of Money
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Updated MF
Statement of Advice – MF Rollover
Statement of Advice – Super Rollover
Updated Super PDS
Updated Offer Documents
Sterling Super New PDS
Sterling Super New Trustee - Sept
Sterling Super New Reporting – Sept.
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Sterling update
Are you giving Credit advice
• What is credit activity?
• Understanding the new referral process
• New Credit Advice Documents – when
and how they should be used
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• Outline easy ways to keep advice generic
so you don’t cross the lines into credit
Are you giving Credit advice
Suggest, recommend or assist a consumer/client:
• Apply for a particular credit contract or consumer lease
• Increase in a credit limit on a particular credit contract
or consumer lease
• Remain in current credit contract or consumer lease
If you do any of the above, you will need to become a
credit representative, hold your own credit licence, or
change your business habits.
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You provide credit assistance or a credit service if you:
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Are you giving Credit advice
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Are you giving Credit advice
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Are you giving Credit advice
Are you giving Credit advice
Credit Guide
• Provided at first interview
• Similar to FSG and provided at the same time (if credit assistance is being provided)
• Outlines who we are, how we get paid, how to contact us and how to make a complaint
Credit Representative Credit Guide
• Provided to the client as soon as you discuss making a recommendation around credit
activity
• Outlines the maximum amount of fees/commissions you may receive from providing
Preliminary
Assessment
credit
activity
• Provided to the client after the Client Data Form but before you produce the Credit
Proposal Disclosure Document
• Outlines such information required to determine if the credit product is not unsuitable for
the client
Proposal Disclosure Document
• Provided to the client at final interview stage before implementation
• In addition to the SoA and should be provided to the client at the same stage as the
SoA
• Outlines specific product details, fees/commissions payable, risks and disadvantages
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• Provided at first interview (if credit assistance is being provided)
• Outlines details relating to fees and areas of authorisation specific to the credit
representative
Credit Quote
Adviser
recommends
client meet
with broker
Client gives
consent to
pass on their
details
Client signs
Referral
Consent
Form
Adviser
passes client
details to
broker within
five days
Broker
contacts
client within
10 days of
receiving
referral
Disclosure of referral
commission is
required upfront
Client meets
with broker
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Are you giving Credit advice-referral
Referral consent form
1. Authority from client allowing client details to
be passed to broker
2. Details of what credit services the Mortgage
Broker can provide
3. Disclosure of referral fees or benefits
4. Statement outlining that the Referrer is unable
to provide credit advice
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Includes:
1.
If you don’t think you cross any of the lines we have talked about,
then you are ok and won’t need to do anything
2.
If you will only be referring, you will need to use the form that has
been developed and ensure you pass on referrals within the set
five day time limits
3.
If you think you can stay out of credit by providing only factual or
generic information, then you don’t need to do anything
4.
If you are going to cross the line into credit, you will need to
become either a credit representative or hold your own credit
license.
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Are you giving Credit advice
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Step 1 – always communicate with your clients. A happy client generally makes no
complaints even if the markets are dropping. Most people want to be informed about
what’s going on and are fearful when they are left in the dark. Fearfulness generally
leads to uncertainty, and uncertainty leads to doubt. Doubt is one of the key drivers
to question whether a client’s adviser is actually doing a good job.
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Step 2 – never leave gaps in the advice process. Incomplete fact finds or lack of file
notes show inconsistencies in the advice process. The Ombudsman will not provide
you the benefit of the doubt; if it doesn’t exist, either on hard copy or electronically, it
didn’t happen. Complainants do not go on a stand and swear to tell the truth and
nothing but the truth therefore the FOS case manager presumes the lack of
continuity of advice.
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Step 3 – ensure you keep the advice within the client’s risk profile. Whilst there may
be variations between asset classes, one of the biggest problems is that the client’s
risk profile has not been applied to the advice that has been given. For example, the
client’s original agreed risk profile was Balanced but the adviser recommended a
number of unlisted property funds or agri-business products, which exceeded the
client’s tolerance to risk in that asset class. This variance was never explained to
the client in the advice document and the client is stuck with dead or locked up
assets, which become the subject of the complaint.
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Complaints – Avoidance
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Step 4 – review clients every year. We all know the GFC was painful but
not reviewing a client for fear that they may get angry because of low
performing assets only infuriates them further into making a complaint. A
good review highlights changing markets and client’s appreciate the
honesty advisers provide in what has happen and what can be done to
better their asset situation. Reviews also show the Ombudsman that
you’re showing due care and skill towards your client.
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Step 5 – follow Licensee directions. Futuro has always got your back in a
complaint but we rely on you to keep good records to provide us with the
relevant information when needed. Given the size of the complaint, the PI
insurer may request their legal representative to step in and defend it.
This is out of our control and imposes the excess that you need to pay
upfront for them to defend the claim.
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Complaints – Avoidance
• General AR’s – 30 points + TASA 10 points =
40 points
• CFP AR – 40 points + TASA 10 points = 50
points
• General AR + Credit AR – 30 points + 20 points
+ TASA 10 points = 60 points
• CFP AR – 40 points + Credit AR – 40 point +
20 points + TASA 10 points = 70 points
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CPD Training/Accreditation in the
new world
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Direct equities
SMSF
Structured products
Margin lending
Business insurance
Aged care
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CPD Training/Accreditation in the
new world
Obligations of a CAR for FOFA
• For example, Futuro may authorise ABC Pty Ltd ACN
or ABN xxxxxxx trading as ABC Wealth Wizards as a
CAR to provide financial services on behalf of Futuro.
• ABC Pty Ltd may sub-Authorise Representatives
(SARs) to provide financial services on behalf of ABC
Pty Ltd as CAR, subject to Futuro’s authorisation.
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• A Corporate Authorised Representative (CAR) is a
body corporate (i.e. a company) appointed as an
Authorised Representative of Futuro Financial
Services, to provide financial services to clients on
behalf of Futuro.
• Whilst outside of the scope of this presentation, the actual
corporate structure adopted by the CAR will depend on the
nature of the business. For example, one CAR may
comprise two advisers, whereas another CAR may have
multiple advisers (i.e. SARs), responsible for specific areas
of the business such as risk advice, mortgage advice or
financial planning advice.
• CARs should consider their structure keeping in mind the
following types of agreements, including for example:
– Employment agreements
– Partnership agreements
– Consultancy agreements
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Obligations of a CAR for FOFA
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In order for the CAR to provide services, it must ultimately do so
through individuals associated with the company. The CAR sets out
the terms of the employee/contractual agreement between the SubAuthorised Representative (SAR) and has responsibility for the SAR,
whilst that SAR acts under the CAR.
•
Whilst SARs are nominated by the CAR, Futuro is responsible for
the actual appointment of the nominee as a SAR. This appointment
is reflected in the SAR Agreement. This agreement is entered into
between the individual SAR and Futuro.
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SARs should have separate contractual arrangements with the CAR.
This may take the form of an employment contract or a consultancy
agreement, depending on the arrangement between the CAR and its
SARs.
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Obligations of a CAR for FOFA
Obligations of a CAR for FOFA
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Poor procedures, practices and inadequate systems may expose
the CAR to breaches of the Corporations Act, which may lead to the
banning of SARs, directors of the CAR’s company and the eventual
dissolution of the CAR.
• CARs should consider the need for Directors and Officers
insurance. This policy is designed to provide cover for any loss
arising from a claim as a result of a wrongful act committed while
performing duties as a director or officer of the company. The policy
is designed to protect the personal assets of the directors and
officers.
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Broad Compliance Obligations
• As the saying goes: ‘Rarely do people join in the same spirit as they
leave the business’. This is why CARs must ensure that they have
adequate procedures, systems and practices in place to meet their
requirements under the Corporations Act (Cth) 2001.
• CARs need to be aware of the key obligations and risks
associated with this structure so that they can identify and
isolate individual issues and seek assistance for tailored
solutions in such areas as:
– Recruitment and Onboarding
– Client Ownership
– Contractual Arrangements
– Quality of Advice
– Monitoring and Supervision
– Training and Education
– Record Keeping
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Obligations of a CAR for FOFA
Recruitment and Onboarding
CARs are responsible for recruiting suitably qualified personnel into
their business
• Sourcing New SARs – who are you using?
• Reference checking – who monitors the upfront and ongoing fame
and character of your SARs?
• Client Base – are you comfortable with your SAR’s client base?
• Best Fit – Does your business know who you want to employ?
How we can assist you
• Do you require any assistance and/or tools to identify and mitigate
risks when onboarding new people into your business?
• Does your business have a comprehensive understanding of who
your SARs are and whether any gaps exist in your current
processes?
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Obligations of a CAR for FOFA
Obligations of a CAR for FOFA
The CAR must determine who ultimately owns the clients.
• Ownership – When a new SAR joins the practice have you
considered the impact of cross or single ownership of any existing
or new clients the SAR may bring to the practice?
• Protection of Revenue – how do you protect your revenue in the
event of adviser/client exodus in light of FoFA?
• Adviser Longevity – Have you considered who retains the clients
under succession planning?
• Disputes – Have you considered the impact of relationship
breakdown?
How we can assist you
• Do you require assistance with establishing the appropriate
ownership structures now or in the future?
• Have you spoken to your State Manager?
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Client Ownership
Contractual Arrangements
The CAR must have an agreement with the appropriate terms and conditions in
place for all SARs.
• Regulatory Change – Have you reviewed all of your existing agreements to
ensure compliance with FoFA?
• Remuneration Structures – Have you considered how you are to remunerate
and/or reward your employees post FoFA?
• Terms and Conditions – Do your current agreements cater for serviceability
of clients, absenteeism, suspension, termination and/or banning of SARs?
How we can assist you
• Do you need assistance with redrafting your employment/consultancy
agreements?
• Do you understand your requirements under the Competition and Consumer
Act 2010?
• What options under your SAR agreements do you have in place for exiting
SARs?
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Obligations of a CAR for FOFA
Quality of Advice
CARs are responsible for all advice provided by their SARs.
• Quality of Advice – How do you maintain consistency in the quality of advice of the
CAR’s clients? Are you testing the quality of advice provided by your SARs?
• Reputation Risk – What protection mechanisms do you employ to protect your
business in the event of ASIC undertaking an inspection of the CAR’s records or
targeting specific SARs for further investigation?
• Approved Products – What processes/procedures do you have in place to ensure
consistency with the Approved Product List and/or Research requirements?
• Claims Management – What processes do you have in place to protect the business
from claims resulting from poor quality advice?
How we can assist you
• What does quality advice mean to the CAR?
• Do you need help with transferring new clients into the CAR that have non-approved
products?
• Do your SARs and/or support staff need further training about providing quality advice?
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Obligations of a CAR for FOFA
Monitoring and Supervision
CARs must check to ensure that their SARs are adequately monitored and supervised
throughout the year.
• Audits – AMP will perform an annual audit of all SARs and advise the CAR whether
there are any issues. It is incumbent on the CAR to ensure that all remediation is
completed in a timely and effective manner and the SAR understands the issues
involved.
• It is important for the CAR to buy in or commit to the entire audit process and
outcomes. The CAR is best placed to quickly locate any apparent irregularities in the
day-to-day operations of the SARs for which the CAR is responsible.
How we can assist you
• Have you determined the compliance culture within the CAR?
• Does everybody in the CAR understand the importance of the Remediation process?
• What processes do you have in place outside of the annual audit to ensure that SARs
are compliant?
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Obligations of a CAR for FOFA
Training and Education
CARs need to ensure that SARs are appropriately qualified and hold the necessary
accreditations to provide advice.
• Accreditation – Do you know your SAR’s competency level?
• Competency – Are you comfortable your SARs are competent in the delivery of
advice?
• AEE– Do you understand how the education technology system works?
• Training Plans – Do you understand your SARs yearly training program/CPD
requirements and do you ensure they meet all of their compulsory requirements?
How we can assist you
• Do you require assistance in providing training for your SARs?
• Do you need help in ensuring your SARs complete any outstanding training issues e.g.
completing CPD points from previous years?
• Is there an opportunity for us to coordinate and/or address all current or outstanding
training requirements more effectively e.g. communicating directly with the directors of
the CAR?
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Obligations of a CAR for FOFA
Record Keeping
CARs must ensure that complete records of all advice provided by SARs are
kept, including details of any discussions, marketing material, FSGs and PDS’
provided.
• Regulatory Attention – ASIC currently focuses their attention on record
keeping requirements.
• Revenue Protection – having good records is easier to defend complaints
against any SAR.
• Revenue Retention – having good records is important in retaining your
current and/or future revenue.
How we can assist you
• Do you need help with setting up appropriate records management
processes/procedures within your business?
• Do you have the appropriate technology to retain and retrieve client
records?
• Would you like further training in client record retention?
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Obligations of a CAR for FOFA
Obligations of a CAR for FOFA
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• The ASIC banning of an owner in South
Australia and the impact it had on his
CAR.
• Ability to brand the CAR’s business collateral, e.g.
stationery and marketing to provide financial services
as a group.
• The use of a company structure may allow for the
implementation of effective tax structures.
• The potential to create a network of advisers who
provide compliant quality advice.
• Subject to effective and appropriate agreements, SARs
can share the responsibilities for client servicing and
quality advice.
• A CAR may create multiple referral sources due to its
size and scale. A tripartite agreement between Futuro,
the Referral Party and the CAR is recommended.
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Benefits of a CAR
• We are looking at the way you use your
Adviser Bio
• What feedback do you have for our
current format/layout/content?
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Adviser profiles
POA/Executor
Conflicts of Interest QAF
2.1 Acting as a Power of Attorney for a client or acting as a trustee
or executor
You must not act as executor, trustee, court appointed trustee or under a power of
attorney (whether this is in a limited or enduring capacity) in any capacity while you
are an Adviser/Planner of the Licensee. However, there is an exemption to this
prohibition that is detailed further below.
• Acting as an Adviser/Planner and as an executor, trustee, court appointed trustee or
under a power of attorney creates a significant conflict of interest and therefore it is
prohibited by the Licensee.
• If a client asks you to be their executor, trustee, court appointed trustee or attorney
under a power of attorney; you must inform them that they must have another person
external to your practice or firm to perform that role so that you are not in a conflicted
position.
Professional Indemnity Impacts
• If you act for a client as an Adviser/Planner and as an executor, trustee, and court
appointed trustee or under a power of attorney it is unlikely that your professional
indemnity insurance will cover you should a claim be made against you.
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•
• Day in the life of a financial adviser
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Summary
Futuro Financial Services
Disclaimer
This is general advice only. It does not take into account an individual's objectives, financial situation or needs, which are necessary
considerations before making any investment decision. Opinions constitute our judgment at the time of issue and are subject to change.
This report was prepared by Futuro Financial Services for the sole use of the intended recipient. Its contents should not be disclosed, in
whole or in part, to any other party without prior consent in each case. To the extent permitted by law, Futuro, its employees, consultants,
advisers, officers and authorised representatives are not liable for any loss or damage arising as a result of any reliance placed on the
contents of this report. Please contact us directly should you have any queries in relation to the information provided in this Report on 07
3018 0400.
Partners in Investment and Growth
ABN 30 085 870 015 AFSL 238478