10 August 2018
Royal commission shows new standards’ silver lining
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.
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 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
Future proof your practice
Instead of solely relying on word of mouth, Kouzma recommends building a strong presence on social media platforms such as LinkedIn that encourage sharing.
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.
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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