Kurt Vonnegut once aptly stated … “Another flaw in the human character is that everybody wants to build and nobody wants to do maintenance.”
Preventative maintenance is often mentioned, but it’s hardly a critical priority for most licensees.
Let’s take a moment to ponder the idea of preventative action.
If, for example, you were running a production line and a core machine to the process cost, say, $50,000 to maintain versus a high-probability breakdown stopping production completely and costing hundreds of thousands, what would you do?
It’s a no-brainer, really.
If you think otherwise, keep in mind that cost is just one factor. What about the impact on reputation and the industry?
Why is it that risk and compliance continue to be categorised as a “necessary evil” and not a core characteristic of a good business?
When it comes to regulatory compliance, many businesses, especially financial advisers, seem to have an allergic reaction. It’s understandable—Compliance often feels like a mountain of red tape. But is it the budget-breaking, profit-bleeding burden it’s made out to be?
Spoiler alert: No, or at least not always.
I appreciate that “the cost of compliance” is an enduring thorn in the advice industry’s side, but isn’t it time to get real and move past outdated perceptions?
While you’re relaxed and open-minded, let’s explore some of the most common myths about compliance costs and explore some smarter, better ways to meet regulatory requirements without breaking your budget.
Myth 1: Risk and Compliance Costs Are Always Sky-High
One of the biggest misconceptions is that regulatory compliance is inherently expensive. In reality, it’s far cheaper than non-compliance.
I appreciate that licensees (and prospective licensees) often feel anxious and overwhelmed. They imagine a constantly escalating line item on the balance sheet labelled “compliance.” The reality is that regulatory compliance can be scaled based on the size and complexity of your business.
- Compliance doesn’t need to be an over-engineered, gold-plated solution for smaller firms. A smart and considered mix of technology, outsourcing, and a lean compliance framework can go a long way.
- For larger firms, costs can ramp up as the scope of operations grows, but even then, smart investment in efficient, customised and effective systems can prevent an uncontrolled blowout.
Many don’t realise there are ways to meet compliance needs at a fraction of the perceived cost. For instance, by leveraging RegTech (Regulatory Technology) and compliance monitoring platforms like [complye], licensees and advisers can automate many compliance processes, reducing manual work, increasing accuracy, and keeping costs down. As Oliver Wyman’s report notes, RegTech has the potential to “significantly” reduce compliance costs by freeing up 10-15% of your staff and automating “many of the tasks now performed by slow, error-prone and expensive human beings”.
Compliance costs aren’t one-size-fits-all but, in ASIC’s words, depend on “the nature, scale and complexity” of your business.
As a golfing fanatic, I realise that a balance is required. More resources aren’t the solution – You can only fit 14 clubs in the bag. Allocating more budget isn’t the silver bullet either – spending up big to buy a complete set of Honma Beres clubs doesn’t make sense if you’re only ever going to the range or the occasional charity event.
Myth 2: Risk and Compliance Offers No ROI
The second myth is that compliance is a pure cost sink with no real return on investment (ROI). This couldn’t be further from the truth. Sure, the initial outlay on systems or advice might feel painful, but compliance delivers tangible and intangible benefits. The data and insights your compliance arrangements should uncover should also deliver commercially valuable insights about your business and your clients. Properly harnessed and considered, compliance can become a source of competitive advantage.
Consider this:
- Trust and credibility: Compliance risk management signals to clients and regulators alike that you’re serious and committed to playing by the rules. This can be a crucial differentiator in a market where customers are increasingly cautious about who they trust with their money.
- Risk reduction: Compliance reduces the risk of penalties, investigations, sanctions or adverse publicity. While it’s hard to put a price tag on avoided litigation or fines, ask anyone who’s been through an ASIC investigation whether they think the money they saved on compliance was worth it. Follow up by asking how much more they paid in lawyers’ fees, staff counselling, remediation costs and consultants.
Remember that knowing the price of everything is not the same as knowing its value. Reflect on the Royal Commission and consider that in an industry where reputation is everything, whether compliance or non-compliance will cost you more.
When advisers are slapped with hefty fines or face reputational damage, they might be in an irreversible downward spiral. In 2023, the Australian Securities and Investments Commission (ASIC)
- Obtained $185,400,000 in civil penalties
- Issued infringement notices to the value of $6,700,000
- Secured $1.6m in fines and costs from
It doesn’t take a Big-4 Consultant to tell you that a proactive compliance strategy is cheaper than hefty penalties down the track. I’ll be even more direct: a well-designed compliance framework mitigates risks and enhances operational efficiency.
Compliance isn’t a black hole for money—it’s an investment in your business’s long-term sustainability and credibility.
“The sheer scale of this impact suggests that, at the time, Westpac had a culture that did not prioritise compliance.” Westpac penalised $113 million after multiple ASIC legal actions, ASIC Media Release 22-079MR
Myth 3: Hiring a Compliance Officer Will Blow Your Budget
Another myth is that when you bring on a financial services compliance officer, your business costs skyrocket (but most compliance people aren’t millionaires). While hiring a full-time, in-house compliance expert (if you can find one) may not be in the cards for smaller firms, there are alternatives.
- Outsourced compliance services are increasingly popular. They offer access to experienced compliance professionals at a fraction of the cost of a full-time hire. Think of it like fractional ownership or renting rather than buying—getting the expertise you need without the permanent overhead.
- Consultants can also help set up compliance frameworks tailored to your firm’s specific needs, supplement your compliance monitoring approach, or insulate you from compliance panic. They’ll ensure you aren’t spending money on unnecessary processes or technologies. And they can do this as a one-off project, avoiding ongoing salary costs.
The key takeaways? The fact that I’m telling you that you don’t always need to hire an expensive full-time compliance officer shouldn’t be interpreted as advice to employ the cheapest option or not employ a compliance officer at all. Most businesses need regulatory support to manage compliance risk, but regulatory risk mitigation shouldn’t be your raison d’etre. Businesses need to take risks to grow and develop. Doing it in a considered way is the intelligent approach.
Ultimately, the most significant risk is to do nothing.
Think about your options. Smarter, more flexible solutions can get you where you need to be, compliance-wise, without propelling you into financial ruin.
Myth 4: More Regulation = More Cost
The “more regulation equals more cost” myth is particularly pervasive.
Licensees and advisers instinctively panic when they hear about new regulations, assuming they’ll need to throw even more resources at compliance. But more regulation doesn’t always mean more dollars and more people.
Here’s why:
- New regulations sometimes provide greater clarity. This can actually reduce costs by eliminating guesswork and redundant measures. If you know exactly what the regulator wants or what they’re not expecting, you’re less likely to overspend on overly cautious measures that aren’t necessary.
- Smart technology solutions: As new regulations roll out, RegTech solutions like [complye] tend to evolve alongside them or in anticipation of them. They are certainly quick to update their offerings to reflect new regulatory requirements, and firms using compliance platforms like ours can stay compliant with minimal additional cost.
Introducing the Code of Ethics is a perfect example of this reality. When the Financial Adviser Standards and Ethics Authority (FASEA) introduced new education and ethical standards for advisers, many in the industry braced themselves for massive compliance costs. However, forward-thinking firms found ways to integrate new requirements into existing systems, leveraging technology to streamline continuing professional development (CPD) tracking and compliance reporting. We incorporated these requirements into our audit methodology well before the Code was mandated, so advisers were educated, nudged, and rewarded for compliance without any financial impact on them or their Licensee. It didn’t blow the budget; it simply required adjusting processes.
With assured support, more regulation doesn’t automatically mean spiralling costs—it means smarter management of new requirements.
Myth 5: Risk and Compliance Is Just About Box-Ticking
Compliance is often viewed as a mindless exercise in ticking boxes to satisfy the regulator, but, as Commissioner Hayne pointed out, mindless box-ticking satisfies no one. With all due respect to institutional licensees and their Big-4 collaborators, that mindset is precisely why compliance costs sometimes spiral out of control. When compliance is approached reactively—like repairing a Beta video —costs balloon, and more efficient solutions are ignored.
A proactive approach, where compliance is baked into your operations and business culture, actually reduces long-term costs. In our experience, Firms that embed compliance into their daily activities spend less time and money scrambling to meet regulatory requirements during audits or investigations. Think of it like regular car maintenance—if you keep up with it, you’ll avoid the cost of major repairs.
We’re all about #smartercompliance, and a smart compliance strategy involves the following:
- Ongoing training: Ensuring your team understands their compliance obligations reduces mismanagement and human error, improves efficiency, and reduces corrective and remedial actions.
- Routine monitoring: Regular internal audits and checks make sure you’re always ahead of the curve. It’s cheaper to address minor issues along the way than wait until a full-blown compliance crisis.
- Cultural integration: Don’t underestimate the importance of culture. Make compliance part of your company’s DNA. Employees who see compliance as integral to their job (not just the compliance team’s problem) are less likely to cut corners, reducing your overall risk. Take the hint from recent ASIC activity and prioritise governance, risk and compliance (GRC) as a core corporate value.
Instead of thinking of compliance as an end-of-quarter box-ticking activity, firms should focus on building a compliance-oriented culture. Since compliance is a fundamental lever of practice value, ongoing maintenance provides long-term benefits.
Myth 6: Compliance Is Static, So You Only Pay Once
Review the ASIC Media Releases (or the comments sections on industry publications), and you’ll see how many people fall into the trap of thinking they can set up a compliance framework, pay for it once, and then forget about it.
In reality, compliance is an ongoing process. But this doesn’t mean endless costs—it means strategic updates.
- Regulatory changes will happen. And when they do, it’s cheaper to make minor adjustments to an already solid compliance framework than to overhaul your entire approach every time the rules shift.
- Annual reviews are a smart way to keep your compliance framework in shape without massive reinvestments. Like a health check-up, a small regular spend on maintaining compliance is much more cost-effective than waiting until you face a compliance breakdown.
Regulatory landscapes shift, but a dynamic, well-maintained compliance system will not need massive cash infusions to keep up.
Likewise, your risk and compliance frameworks can never be set and forget. Continuous improvement is critical to functional effectiveness and an integral component of risk management.
Final Thoughts: Compliance Doesn’t Have to Break the Bank
The fear that compliance is an uncontrollable cost is, at best, exaggerated and, at worst, a complete misunderstanding of how smart businesses manage their obligations. Advisers who treat compliance as an investment—rather than a burden—will find themselves in a stronger, more resilient position.
By leveraging technology, outsourcing where appropriate, and adopting a proactive compliance mindset, advisers can meet their regulatory requirements without wiping out their bottom line. It’s not about how much or how little you spend on compliance—it’s about how smart you (and the people and systems you rely on) are.
So, will you continue to see compliance as a burden, or are you ready to turn it into your competitive edge?”
If you liked this, we recommend:
Why a Second Opinion on Compliance Matters
Why Compliance Isn’t Enough: Reconciling Law with Ethical Principles and ASIC’s Expectations
The (Regulatory) Cost of Complacency
Frequently Asked Questions
1. Is regulatory compliance always expensive for financial advisers?
No, compliance costs can be managed based on the size and complexity of a business. By leveraging tools like RegTech platforms, outsourcing tasks, and using scalable compliance frameworks, even small firms can meet regulatory requirements cost-effectively.
2. Can compliance provide a return on investment (ROI)?
Yes, compliance delivers both tangible and intangible ROI. It builds trust with clients and regulators, reduces the risk of penalties, and uncovers valuable business insights. A well-designed compliance strategy enhances operational efficiency and supports long-term business sustainability.
3. Do new regulations always increase compliance costs?
Not necessarily. New regulations can provide clarity, reducing guesswork and unnecessary measures. Additionally, tools like RegTech solutions evolve to address new compliance needs, enabling businesses to stay compliant without significantly increasing costs.
4. Is hiring a compliance officer the only way to manage regulatory obligations?
No, businesses can manage compliance without hiring a full-time officer. Options like outsourcing compliance tasks, hiring consultants for specific projects, or using shared services can provide expert guidance at a fraction of the cost of a full-time hire.
5. Is compliance a one-time cost?
No, compliance is an ongoing process that requires regular updates and maintenance. Annual reviews and proactive adjustments to frameworks ensure continued adherence to evolving regulations, making long-term compliance more cost-effective than reactive overhauls.
