At the end of March the first phase of the Australian Securities and Investments Commission’s financial advisers register (FAR) will go public. Between now and then, every Australian financial services licensee must ensure they have provided details about their advisers’ past employment details.
By the end of May, when phase two of the FAR goes public, AFS licensees must provide details of advisers’ educational qualifications and designations.
The start date is now less than four weeks away.
Making sure information on the register is both accurate and up to date is a critical step in ensuring its credibility and its usefulness for consumers, according to the head of wealth for Veda, Mark Hoven (pictured).
The information entered into the register is ultimately the responsibility of licensees, even if it may be provided to the licensee by the advisers themselves.
Hoven, a former managing director and co-head of global fund services for Standard & Poor’s, says third-party verification of information is a way for licensees to protect themselves from providing incorrect or misleading information to the register.
Verification at source
Hoven describes checking data provided to licensees as “verification at source”. It means going directly to, for example, the Financial Planning Association (FPA) to confirm that a financial planner has been awarded – and continues to hold – the Certified Financial Planner (CFP) designation; or going to a university to confirm that an individual actually graduated with the qualification they claim. And it also means confirming that an adviser has previously been employed by the organisations they claim.
“Verification at source is what we say is the highest standard, and creates a higher level of confidence than any other approach,” Hoven says.
“You are verifying the elements of information that are required for the register from the employer who previously employed the adviser, from the educational institution that trained or educated the adviser, or the professional association that qualified that person through a series of test or other screens and filters,” Hoven says.
“Going to the source, going to the institution to receive confirmation in physical form – a transcript – is the highest form of verification. Anything short of that – relying on the same document, but provided to you by the adviser – is not the same level of qualification.
“In the world of financial crime and employee fraud, identity takeover – all of those very common methods of fraud and scamming – allow documentation to be replicated and reproduced, fictitious organisations to be created with legitimate-sounding names – all of those things are possible if you do not go to source.”
Approach is the same
Hoven says Veda is working with the biggest institutions and small firms, small independent and non-aligned firms. But the approach is the same for all of them.
“We receive a full list of the advisers and their contact details,” Hoven says.
“Using our platform we will make contact with those advisers and they will provide the information that is required. They will define where they’ve worked, where they’ve studied, hat qualifications they’ve got. They will provide their consent for every one of those pieces of information – under privacy laws they have to consent…to allow us to verify that information.
“Some of those things will be very quick and automated. Bankruptcy checks, police checks, where the institution requires or asks us to do those things, they’re a more or less instantaneous, straight-through-processing types of check.
“But virtually everything else is manual. Using our team we will get on the phone and call [a university] and confirm that [an adviser] did get a Bachelor of Commerce at your university, and we will get a transcript.
“We’ve got a team of people making calls to the HR departments in employers, to registry offices in university institutions, and to the associations.
“We’re not relying on any information that the licensee may or may not already have on that person, other than ‘he works for us, and this is his email address and mobile phone’.”
Reported back
If information can’t be verified, or is found to be false, it will be reported back to the licensee, and left to the licensee and the adviser to sort out between them. Hoven says licensees are not compelled to have the information in the register verified, but they are responsible for its accuracy.
“The penalties for if it’s wrong or if the information is incorrect or misleading fall both on the licensee and the adviser,” Hoven says.
“Everyone’s reputation is at stake with this register: the industry’s reputation, the government and the regulator for leading this initiative, the licensee and the adviser.”
Hoven says the verification process can be adapted to provide ongoing surveillance of advisers, so if their details change they are notified directly to the licensee, which can then update the register appropriately.
“We anticipate being engaged longer term to do some of the things that you just referred to – maintaining an ongoing surveillance process, and tightening up the on-boarding processes for new advisers.”
90 per cent of advisers
Hoven says Veda has been taking to licensees that account for about 90 per cent of advisers active in the industry.
“We’ve been engage and we’re working with a couple of institutions, and we’re in advanced discussions with other institutions, and a number of non-aligned financial advice licensees.”
Hoven says conversations that have been “going on for a while and it’s only been in the past moth that these organisations have really seriously engaged to start the process”.
“When we’re engaged, it’s because a licensee wants to go to that higher level of verification,” Hoven says.
“We’ve been talking to the whole industry since the day the announcement [of the register] was made in October.
“We’ve been talking to the major institutions – the top 50 to 75 independent licensees since that point. It would be fair to say levels or readiness, awareness, preparedness and activity has been on a scale from zero to 100, right through the Christmas/new year period, right up to the announcement in early February finally specifying the definition of the register.”
Hesitancy understandable
Hoven says he can understand licensees’ hesitancy
“These are organisations – particularly the independent licensees – that do not have infinite resources to throw at these projects. They’re already working on a number of FoFA-related regulatory reform projects; and there’s BAU: business as usual.
“We understood the hesitancy to commit resources and begin collecting [information]. The intent of this register is admirable and we should all support improved disclosure, transparency and confidence for consumers, but it has a significant impost on these firms. It requires disturbing the adviser.”
