Taking ownership of the incoming rules is advisers' best course of action, explains Louse McCabe.
It’s no secret that the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry is eroding public trust in financial advice.
This increases pressure on advisers already struggling with consumer suspicion from previous financial-advice scandals, coping with the burden of extra compliance requirements, and returning to study to meet the incoming education standards.
It might be a struggle to grasp right now, but these changes, even the negative tsunami of the royal commission, represent opportunity for financial advisers.
Firstly, the compliance and education standards that advisers must come to terms with are the very factors that will ameliorate the reputational damage the sector has suffered recently by clearly showing the high standards advisers must now follow and improving actual standards of advice in the future.
And secondly, with increased public awareness and more rigorous assessment of advisers, those offering poor advice will struggle, while those proving themselves to their clients will cut through and benefit from positive word of mouth and build their book.
Phil Anderson, general manager of policy and professionalism at the Association of Financial Advisers acknowledges that public perception of the advice industry has been damaged by negative media coverage, however, he believes most clients have confidence in their adviser and that “improved education standards and a code of ethics will help restore the public’s trust and confidence" though he warns they’re not a "silver bullet".
Get the most out of the new education standards
Aside from reputation improvement, the other clear benefit of the education standards is that advisers must invest in themselves (and their business) – something some have ignored for some time. This will lead some advisers to new ways of doing business.
The education standards could have an effect in three main ways.
- It’s a golden opportunity to take an objective look at your skill set and your strengths and weaknesses and determine areas you need upskilling. More advanced skills leads to better business practice, increasing confidence in advisers and their clients, and is a powerful response to the kind of negativity the royal commission airs. A case in point is Money Management business development manager of the year Shadia Kouzma. The ANZ employee completed an advanced diploma of financial planning but felt there were still gaps in her knowledge so she undertook additional study. While it was hard work, it boosted her technical and product skills – one of the reasons she won the award.
- Education can benefit the bottom line. For Kouzma, it was as simple as learning new terminology: “I completed some courses in medical terminology and underwriting so I could better help the advisers I was working with.” As a result, she’s been able to run successful sessions across the state about medical and financial red flags – courses usually presented by an underwriter. This not only increases her skill set, but develops deeper understanding and builds profile in the industry.
- There is a potential downside. Advisers approaching retirement will be disadvantaged, says Anderson, as returning to school is a harder investment for them to make when the end of their working life is something they’re considering.
Advisers should search for support
Following the royal commission, the Australian Securities and Investments Commission has confirmed it will increase scrutiny on advisers and follow it up with stricter enforcement. By making the most of the available support, advisers will be able to face this new environment with confidence.
“Advisers need robust, consistent processes in place,” says Kouzma. “They can help achieve them by using the resources available to them: their practice development manager, business development manager and licensee, and other services (such as ANZ’s Tech Assist line), that they can call any time.”
She says advisers can take action now and prepare themselves to answer some difficult questions, and suggests they start by calling their clients to ensure they’re comfortable with the advice they’ve been given.
The new standards that will improve advisers’ reputation
- A relevant bachelor’s degree or higher, or study to gain an equivalent qualification.
- Meeting annual continuing professional development requirements.
- Passing an industry exam.
- Adhering to a code of ethics.
Future proof your practice
- Use alternative channels to build referrals
Instead of solely relying on word of mouth, Kouzma recommends building a strong presence on social media platforms such as LinkedIn that encourage sharing.
- Build your relationship skills
Complete a self-audit to discover strengths and identify any skill gaps. “I found that attending leadership talks and courses has really helped,” says Kouzma.
- Leverage technology and digitisation to stay competitive
Advisers should view technology as a partner rather than a competitor, particularly to meet clients on their terms and make their work more efficient.
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