|Adviser Compliance Procedures still Wanting|
A recent study on financial planning business practices has found them to be lacking in a number of compliance areas that may make adhering to the new Future of Financial Advice (FOFA) reforms more difficult.
The Business Health Future Ready IV research paper found only 74 per cent of practice principals said they documented all of their discussion with their clients. This portion was actually down from the last time the survey was conducted, when 85 per cent of participants said they compiled this level of documentation.
"In the case of a dispute (and if a client's recollection is different to the adviser's), the quality of the file notes can bolster or destroy a case - let's hope this does not become an expensive problem for the one in four advisers who are not currently file noting all of their client interactions," Business Health said in its report.
In addition, 87 per cent of practice principals said they had appointed a senior manager or director to look after the compliance procedures of the firm, which was in line with best practice principles.
Furthermore, only 43 per cent of financial planning practices had drafted formal agreements regarding confidential business functions with third-party contractors they used.
"While outsourcing certain operations can be a prudent and cost-effective business model, the practice principals still remain ultimately responsible for what their outsource partners do," the Business Health study said.
"They need to ensure that they can demonstrate that they have in place appropriate measures and processes to select suitable providers, monitor their performance and deal with any actions which may lead to a service breach."
Due to some of these factors, the survey found overall 19 per cent of advisory practices were rated as having poor or average health with a third of firms receiving a less than fit assessment.
"Regardless of the FOFA reforms that are eventually passed into law, every licensee and advisory practice in the country will need to review their business systems and process and ensure they are operating within the requirements of the new framework," Business Health said.
Published on our website on Mar.21, 2011