Compliance and cost-efficiency: A balancing act

Whilst compliance has always been a major responsibility of financial planners, it has come to prominence as an issue in the industry following the release of the Hayne report. Despite the fact that thousands of independent financial planners have always worked for the benefit of their customer, more intense scrutiny from regulating bodies will increase the cost of compliance in coming years.

Industry Concerns

A limited amount of time available to service clients coupled with increasing compliance costs hinders the ability of financial planners to take on new clients. In fact, a recent survey by Investment Trends found that 60% of independent financial planners identified compliance as a burden, and 92% had no or only minor compliance issues identified at their most recent audit. The same report found that nine out of ten financial planners identified business efficiency as a major issue, and that it gets in the way of servicing a broader client set.

Another concern arising in the industry is the decreased ability for financial planners to serve lower-value clients. It takes a similar amount of time to prepare an FDS and other documentation for both high- and low- value clients, so there is less reward in serving new customers with lower investment values. Whilst many advisers fully understand the long-term value of smaller clients, it is quickly becoming difficult to do in a cost-effective manner that makes business sense.

Compliance Solutions

One proposed solution was for dealer groups to take responsibility for providing tools to help demonstrate the value that advisers can add to save resources on marketing. However, a large percentage of advisers reported that they were already dissatisfied of the quality and volume of leads obtained through dealer group solutions.

Self-licensed financial planners have been quick to jump on new technology that allows them to manage compliance and serve their clients, with dealer groups slowly following behind. Whilst there is an up-front license cost, some new systems can save thousands of hours of manual work, increasing the ability to onboard new clients.

One such system that is highly regarded in the industry is CommPay, a scalable revenue management solution designed specifically for financial planners. CommPay integrates with XPLAN to combine client revenue data with CRM capability and supports a variety of complex revenue sharing splits and remuneration model arrangements. It not only saves time with customer management and document preparation, but also manages revenue statements and regulatory reporting.

What’s Next?

Despite the challenges in the current financial climate, there is still plenty of opportunity in the industry for advisers willing to adopt new technology quickly. In fact, only 13% of financial advisers have an overall negative view for the future of the industry. The theoretical value of financial planners is still widely recognised by the public, but they now need to prove their dedication to client outcomes through strict and public compliance.

If you are looking to overhaul your compliance strategy or implement a CommPay solution, contact us at ComplyX for a confidential discussion on the future of your firm.