The Compliance Refinery’s Steven Burgess explains how advisers can approach the waves of change fast approaching the financial services sector.

The financial services industry is faced with significant change at all levels of the industry. Financial advisers and financial adviser businesses are left to make decisions regarding their future, but the decision is the easy part. Managing and delivering successful change in the long term isn’t easy. Change requires strong planning and delivery.

What is the change?

The pace of change is very significant and no easy task to keep up with, it includes:

  • Financial Services Legislation Amendment Act
  • Changes to the Code of Conduct
  • FMA Insurers Report
  • MBIE Review of Disclosure Requirements
  • Fall-out from the Australian Royal Commission
  • The upcoming Conduct and Commission legislation

Don’t forget the GAPs.

It is important to step back and look beyond the ‘noise’. While everyone is focusing on regulatory change, technological advancements are advancing quickly. Businesses should be considering how they will update and adjust as technology changes. This is also changing customers expectations of the service level they expect from advisers.

This is a very significant change to advisers and adviser businesses and it doesn’t even include other legislative changes going on in the background.

How does it impact you?

Financial adviser businesses and financial advisers have to decide if they will become a financial advice provider (FAP) or not and assess what that means for their business. They also have to assess and address how their business model will meet the requirements set out in the new legislation and otherwise changing landscape.

Financial advisers also have to decide how and if they will transition. A number of advisers are taking a strong look at the changes and deciding it might not be for them or to simplify their business.

Product providers are having to react to new expectations from the FMA, partly as a result of the Australian Royal Commission probe and the FMA’s Conduct review.

Dealer groups and aggregators are having to decide whether or not to become a FAP in the new regime and/or what their value proposition will be moving forward. They are also having to deal with changes to their business model.

Even the FMA has to be cognisant of the Australian Royal Commission calling out ineffective regulators in Australia.

Financial adviser businesses and financial advisers are asking how to navigate the change and what steps they can take to ensure they make good decisions.

How do we approach the change?

Managing change can be difficult in the best of times. It creates stress and uncertainty, as well as opportunity. It is a great time to look at yourself and your business to assess how you want each to look in the future.

“It is important to ask the industry specific big questions and focus on the changes you know you have to make.”

Some issues to consider:

  • Which maximises the underlying value of your business more – joining a larger FAP or creating your own? It is not an easy question to answer. Even if you are planning on becoming a FAP, investigate the alternative to make an informed decision and have an alternative in case you need it. Also understand how and what changes your business would have to make under each scenario and ensure you include an assessment of your support staff.
  • Are you a business that meets minimum standards or do you strive for best practice? As larger FAPs evolve, the best practice bar will be raised with a larger gap between those meeting minimum standard today and best practice tomorrow. How will that impact the value of your business in the future and the relationship with product providers?
  • Would you rather be a financial adviser or compliance person? If the answer is financial adviser, do you really want to start and manage the compliance responsibilities of a small FAP? Do you have the time, resources and skill set?
  • What is your future in the industry? The adviser community is a largely mature community. Are you planning on being full-time in the industry for more than five years? How is that impacted by having to learn a new skill set (if starting a FAP)?

Change isn’t easy but understanding the basics of how you want to move forward makes it easier.

Timelines to understand

Decision making on becoming a FAP – You should be in the process of investigating your options now and assessing your own business. It is not a quick and easy exercise. If you haven’t started yet, get started!

November 2019 – Transitional FAP licensing to begin. This is expected to be an online tool that should be a straightforward process.

June 2020 – New regime begins, the new Act, regulations and Code of Conduct come into force. Transitional licensing closes and FAP licensing begins.

Quarter 2 2020 – Quarter 2 2022 – Transitional period continues:

  • Competency safe harbour for previous industry participants
  • Financial advice providers must hold transitional or full licence
  • Financial advisers must be engaged by a FAP
  • Financial advisers and FAPs must be registered on the FSPR

Quarter 2 2022 – Transitional period ends

  • Competency safe harbour for previous industry participants ends
  • Financial advice providers must hold full licence

Creating a Change Plan?

The regulatory change is very significant and it will impact how you operate in the short term and the long term. Ensure your directors explore all business options. Although you might plan on becoming a FAP, know what your options are to enter a FAP. Make an informed decision!

Clearly define the change and align it to your business goals.

Create a 3 to 5 year business plan that includes an assessment of your options moving forward, including a decision or a plan to make a decision. You will have some important targets to meet, as noted above. Include an analysis of the skill sets and life stages of directors, advisers and key support staff.

Develop an Action Plan

Create an action plan to meet the path of action you have decided on. You might need to utilise external resources for this. It is important to have hard deadlines and formally track key deadlines. A poor plan will lead to stress and rushed decisions later. Appoint an internal owner that is responsible for delivery. Build in celebrating your successes with your staff.

Communicate with the people in your business

Change is stressful on people; the unknown is more stressful. Be open with the people in your business, assure them of the process and the outcome. Managing the stress is very important to the eventual outcome.

Actively manage the action plan

Have regular meetings to track your progress. When you have regulatory deadlines, it is important to ensure that you track your progress.

Steven Burgess is CEO of the Compliance Refinery, working with adviser businesses to make compliance a stress-free experience. You can contact Steve on 0275220477 or