“Comparison is the death of joy.”
— Mark Twain
When Apples aren’t Apples:
How do you really compare the pear?
You didn’t become a financial planner so that you could spend all your time on compliance, but finding the balance is the perennial problem.
The solution, at which most Licensees arrive at eventually, is to engage external compliance professionals and leverage their expertise to minimise your risks and optimise your performance.
But even this strategy is not without its challenges; how do you determine whether the external compliance professional has the scale, experience and insight to satisfy your needs?
To put it another way, since compliance support is a “credence good” – a service whose utility cannot be accurately assessed even after purchase – how can you determine their capability?
Is the value of compliance expertise, like the value of financial planning, simply reflected in the cost?
Cost, as I’m sure you’re aware, is a very poor indicator of expertise and capability; some of the most highly paid providers supported, and advised, those businesses exposed by the Royal Commission.
Is the value of compliance expertise, like the value of financial planning, a function of brand visibility and marketing?
Unfortunately, while it may provide a measure of reassurance and a suggestion of capability, some of the most visible brands have been associated with the most visible compliance and ethical failures.
In an environment where the ability to spell ‘compliance’ alone can secure a significant salary in an institutional licensee’s remediation program, how do you separate the pretenders from the contenders?
It’s almost like you have to become a compliance expert to effectively outsource your compliance.
“We’re not the Regulator. Our job, and our number one priority, is to help advisers provide great advice.”
— Sean Graham
Changing needs
One of the more significant shifts in compliance support has been Licensees’ decision, in the context of increasing complexity and decreasing margins, to use their resources more effectively. From our perspective, this is not only their increased willingness to engage specialised services but their willingness to move from transactional services to an integrated support model. In the old days, for example, Licensees considered the ‘compliance job done’ by engaging an auditor to do an annual review. Now, the better Licensees recognise that the audit is the least of their issues and that, by securing a broader range of services, they better manage their risks and their expenses.
I know what you’re thinking; of course I’d say that given that Assured Support provides the full range of compliance services you need (including adviser reviews, compliance operations, dispute resolution and licensee standards and manuals).
That’s a valid point, but it doesn’t invalidate the data that proves that engaging external experts delivers a range of quantifiable benefits; from better expense control, predictable outcomes and better risk management. These are in addition to the qualitative benefits you receive from engaging compliance specialists to lessen the burden of compliance.
Is it better to directly employ one person to “handle compliance” or, after recognising the complexity and frequently changing compliance obligations, engage a team of experts that can respond, in real time, to your current and anticipated needs?
Is it better to use multiple providers and disjointed services or engage a firm with the scale, capability and experience to service all your needs from legal advice, adviser audits, compliance operations, manuals, Standards and regulatory support?
We are seeing more and more Licensees choose the latter option. It makes sense, employing compliance people directly can be an expensive and a sub-optimal solution; their high salaries are accompanied by an internal conflict that compromises their value (REP 515) and their experience, and insight, is often far more limited than you initially realise. Often, it’s only obvious when it’s far too late to correct.
In my previous role, I saw that transactional compliance services were the norm because that suited the interests of the service providers; margins could be maintained and expenses reduced through the use of cheaper, and relatively inexperienced providers. Better yet, the transactional review service created no ongoing obligation (or expectation) of either quality or reasonable reliance. Even better, where issues were subsequently identified, the provider could offer distinct remediation or consulting services completely unconnected to the services they previously provided. All care, no responsibility (or, more accurately, some care, no accountability).
That model suits no one except those businesses ticking boxes to look professional. Professional advice businesses, and advice professionals, want partners that will work with, and support, them to ensure their businesses are both profitable and supportable.
That’s our raison d’etre.
Less, more or different
As the demand for outsourced compliance grows, the number of providers has also grown significantly. The trouble is that few advisers have the time, capability or resources to properly compare providers; so, they default to making their decision either on the basis of cost or, where providers’ costs are the same, on the basis of their relationship.
Financial advisers know, better than most, that cost is a misleading indicator of value.
To be fair, price will always be a relevant factor but, honestly, it’s far less important than culture and capability.
The provider’s culture – which is shorthand for their approach, focus and capability – should be evident in the way they present themselves; both intentionally (website, publications and presentations) and unintentionally (social media, ASIC releases and litigation). The clarifying questions you ask for the prospective partner should not simply address superficial questions about cost and competency, but attempt to ascertain the why that drives them and identify the proof that confirms their drive.
It’s not an easy thing to do, particularly when few providers have a consistent and replicable methodology and fewer still offer services that are directly comparable. Even the substance and scope of adviser reviews vary significantly between providers, some even lack the systems to provide industry insights and benchmarking, integrated remediation or effective coaching. It’s an industry that, ironically, doesn’t even use consistent language or common standards.
How do you compare things that are not obviously comparable except in terms of cost?
I’ve had this discussion (in numerous variations) with institutional clients, bank executives, licensee heads and individual advisers. There’s no easy answer but my answer, and my approach, is that your prospective partner should provide you with the data, information and the insight you need to make an informed decision about who you should engage as your Compliance Partner.
They should be open about their credentials and their capability – a provider that is best aligned with your cultural values might have neither the experience nor the resources to provide the support you need. There are innumerable single service providers but do they have the “bums on seats” to service their clients’ needs – particularly the unanticipated needs?
Ask yourself, if (or when) things go wrong – whether it’s a complaint, claim, breach or regulatory intervention – will your partner have the experience and resources you’ll need to meet that challenge?
Can any single person – no matter how reasonable – really stay current and focused on the breadth of compliance needs and issues?
One of the reasons for our growth over the past few years, is that Licensees and advisers have started to recognise the significant value they can realise by engaging a firm with a large team of experienced, capable and available compliance experts. Our scale, as well as our technology, reputation and data make us a more attractive option for our clients than other (cheaper) options.
We’ve found that, particularly when they’re facing profound regulatory, strategic or legal problems, Licensees turn to us to provide the advice and services the smaller providers cannot (and the practical solutions their lawyers can’t).
Whoever you engage, and no matter whether you’re a new or established licensee, you should proactively review all of your suppliers; critically assess their value (services provided against services offered) and consider whether your business, and your peace of mind, is better as a consequence of their engagement. Did they make you feel better? Or become better?
As a consequence of my experience with the Big Consulting firms, I’ve seen how incompetence and false sense of security combine to profoundly damage otherwise well-run advice businesses. Confident warranties offered by previous consultants using outdated and ineffective precedents created a compliance quagmire that took far more time, resources and energy to unwind than the Licensee saved by outsourcing.
How to make better choices
If you want to be a step ahead of the game, and avoid those sleepless nights, here’s where to start.
- Google the proposed provider. Where are they published? By whom are they engaged? With what legal or regulatory matters were they involved? What is their reputation? What is their public position on key issues? Are they targets of legal or regulatory actions? Are they credible? Are they adequately, and appropriately resourced? How large is the team and how many clients do they serve?
- Consider what they are offering (and what you asked for)? What is the scope of work and are you getting the expected value from your compliance provider’s experience and expertise? Should you broaden the scope of your engagement with your compliance provider? Have they quoted what you asked for or taken the time to consider what you need?
- Think about the future. How agile and nimble is your compliance provider to transform itself to support you if you grow? Is your compliance provider constantly improving or have they reached a plateau?
- Assess your partner’s performance. Is your compliance provider meeting their agreed service levels? Can the prospective partner meet or exceed your service levels? Are they clearly defined and congruent with your values? Are you getting the value you planned for when you decided to outsource?
- Lastly, think about cost. Is your compliance provider’s pricing above or below market? What value can they reasonably be expected to deliver? How will you confirm value? What internal value will you realise (or what resources will you free up) by engaging the provider? Is the benefit greater than the cost of their appointment?
The Call to action
I appreciate it’s not easy to compare compliance providers. Even with my experience, and my knowledge of the compliance market, it’s sometimes difficult to separate the contenders from the pretenders. It’s even more difficult when you consider that compliance outsourcing models have changed so significantly, from transactional to hybrid and from reactive to strategic.
There are two ways I can help you.
First, when you’re considering your options look beyond the bottom line cost to consider, and assess, prospective providers on the basis of their:
- Capability (their team, resources, background and focus);
- Accessibility (responsibility, availability and responsiveness);
- Reputation (background, public positions, publications, cases, claims and actions);
- Longevity (time as a service provider); and
- Scale (team, resources, technology and client base).
Second, call me on 0413 899 789 or email me and I’ll try to help you make a better decision.
I’ll be up front. I think Assured Support is your best option for effective compliance support. We’re a ‘one stop shop’ with the team, the services, the experience and the reputation to deliver what you need now, and in the future.
That said, if you’re not the right client for us, or if I think another provider would suit you better, I’ll be the first to point that out.
