Following a relatively calm period in regulation and in the absence of new pressing compliance issues, advisers’ attention is split between the uncertainty around the implementation of the Quality of Advice Review recommendations and a couple of old struggles.
Joel Ronchi, an ex-financial adviser and CEO at consultancy Fourth Line, tells Professional Planner constant change in regulation is one of the hardest things for advisers to deal with when it comes to compliance.
“The overarching theme at the moment is obviously the QAR recommendations,” he says.
“That is why a lot of advisers are looking forward to the QAR implementation, because they want it done. Uncertainty is hard.
Staying across it is why, in some ways, advisers are part of a licensee – because then they don’t have to worry about [the changes] themselves.”
Ronchi says that when the changes come through, they will have a direct impact on advisers. But even though they will, with an example being the simplification of fee consent which matters for advisers who have ongoing service agreements in place.
On the hand, replacing Statements of Advice with an advice record, as proposed in the government’s response to the reforms, won’t necessarily change the advice creation process.
“Something else will come in its place… there will be some kind of advice document or advice record so advice practices and licenses will need to adjust for that,” Ronchi adds.
At the same time, he stressed that advisers should focus on being prepared for the changes but this does not mean they should be “worried”.
“One of the things that advisers have sometimes been not great at is forward thinking,” Ronchi says.
“The Government has already released its response last year, heading into this year, now it is just a matter of legislating it so [it is a matter of] knowing something is coming and not being prepared for that, and leaving it to the last minute and then trying to get on top of it. I am not saying that they should be worried I am just saying they should be thinking about it.”
Some advisers are already aware of these issues and have started to “think it through”, however unless the legislation is passed there is still much uncertainty, he adds.
Integrity Compliance director and former Financial Ombudsman Service panel case manager Rhett Das says the resounding comments he gets from clients is about QAR fatigue.
“There is a lot of fatigue around trying to keep up and trying to get their heads around what is happening,” Das says.
In his experience, advisers are “not even going to bother really thinking about the QAR, until [they] know when the legislation is passed.”
Although some advisers are already preparing for the upcoming changes, the majority of them are focused on running their day-to-day businesses, he says.
Old issues
Das says there is still unfortunately a number of advisers struggling with the fee disclosure statements (FDS) and the concept of records of advice, a trend he is seeing especially among his newer clients and among advisers whose “FDS processes are not where they need to be”.
He says part of ‘the old’ problem is that some advisers tend to delegate that role to junior staff or administrators who have not necessarily had appropriate training and do not really understand the process and because of that they struggle a lot.
“They struggle with [things like] determining anniversary dates, with what happens with change in arrangements, what is a significant change in the arrangement, and with what happens when the client don’t come in and they’ve left the meeting to the last minute for a relevant period,” Das says, adding he also sees practices lack a thorough understanding of what needs to be included in the SOA.
