By Jacqui Henderson
It is not only trends in fintech and 'RegTech' that will influence how financial advice is provided in 2020, but also changes in educational technology.
Adviser education standards recently set in law demonstrate again a fundamental truth of our era: regulation imposed by government – yielding to consumer pressure – continues to be a most disruptive force in the financial services sector, especially for financial advisers.
In fact, the hard-working members of Australia’s financial advice community have borne the brunt of constant regulatory change for too long. Let’s hope the latest shift signals an easing of the overload. Our firm is doing its bit to help simplify and shave the compliance burden on advisers.
But with higher education standards now a formative part of the advice sector, should we also expect the emergence of ‘EdTech’ as the newest offshoot on the horizon? After all, if RegTech is the new fintech, it would follow that higher education and ongoing training may certainly shape – or at least complement – the face of financial advice technology in Australia.
The trend is not going away. As Kelly O’Dwyer, Minister for Revenue and Financial Services, wrote recently, “Few Australians would know that currently it is possible for someone to hang up their shingle as a qualified financial adviser after only four days of professional training.”
Perhaps even fewer Australians would also know that O’Dwyer had just welcomed new legislation to bump up the minimum four-day adviser training regime to a new, four-year standard.
Under the reforms – due to go live on 1 January 2019 – newly-hatched financial advisers will need to hold a “relevant degree” (usually a minimum three-year process) as well as completing a year of professional supervision before earning their solo wings.
The regulatory net also extends to the current flock of financial planners who must “reach a standard equivalent to a degree” by January 2024.
Among other legislated items, all advisers must pass a to-be-finalised competency exam and comply with an as-yet-unwritten Code of Ethics.
While the official uplift in professional standards might cause concern at the margins, the regulatory-imposed change is more one of pace than direction for the industry.
The financial advisory industry embarked upon the professional pathway some years ago and, to be fair, the financial adviser RG 146, four-day-wonder was always more of a media hook than standard industry practice.
Nonetheless, the recent law championed by Minister O’Dwyer does underscore the fact that the financial advisory industry has hit a new level of maturity with the educational bar now on a level with similar professions such as accountancy or law.
The minister’s release announcing the latest professional standards law also points out that industry associations and “other independent third-party monitoring bodies” will police adviser compliance with the imminent Code of Ethics.
“This will ensure that financial advisers are held to a high standard of ethics, with non-compliant advisers subject to disciplinary action and sanctions by the monitoring bodies,” the minister’s statement says.
In the face of such a relentless regulatory offensive, financial advisory firms will inevitably seek technological solutions to ease the compliance burden.
Fortunately, today’s technology affords advisers more scope than ever to seamlessly adapt their businesses to new regulations rather than patch over historical compliance gaps.
Constant re-regulation has been the norm for this industry, dating back to the Financial Services Reform process through to the 2012 Future of Financial Advice regime and beyond.
However, the historical experience of financial planners in Australia is proof that adjusting to new compliance regimes – no matter how much practice you’ve had – is never easy.
Whether the latest batch of regulations marks the end of the regulatory journey for the financial advisory industry is impossible to say.
Perhaps being agile is the new norm?
This was the answer advocated by global consultancy firm Deloitte late in 2016, which said the defining feature of the new breed of regulatory technology (or RegTech) is – that word again - “agility”.
“Whilst traditional solutions are robust and designed to deliver on your specified and ‘locked down’ requirements, they can be inflexible and require development or configuration in a proprietary language for enhancements or changes,” the Deloitte report said.
“… RegTech has a very bright future, with a huge amount of opportunity for those developing this type of technology to automate and enable the world of regulatory assessment and control management, bringing clarity and control to an area of the business that is so incredibly important, but so often cumbersome and time-consuming...”
Based on current projections, financial advisers have more than four days but less than four years to be RegTech ready for the new regime. Whether we see some form or supporting ‘educational tech’ emerge remains to be seen.