Having just returned to the UK after spending thirteen years in Australia transforming financial services organisations and IFA institutions with a geographical range the size of Europe, it’s a very compelling exercise to be asked for my reflections on the differences and similarities between Australian and UK financial services.
Yes, Australia maybe around 17,000 km away depending on which state you live in, and business flights from capital to capital can take between one and five and half hours, however, they certainly seem to be enduring some of the same challenges as the UK with only five or so Professional Indemnity Insurers and PI premiums going through the roof.
What is different in Australia, however, is that they are currently going through the perfect storm from an Educational, Regulatory and Legislative perspective after enduring a royal commission into banking and financial advice and seventy-two recommendations to be implemented before the current COVID-19 pandemic took hold making trading conditions extremely difficult for IFA practices in Australia.
Australia has indeed followed the UK in enhancing qualification standards to promote professionalism, and legislated that all new advisers now need to have obtained a post-graduate diploma in financial Planning, and existing financial advisers need to obtain this before 2023, otherwise they lose authorisation.
One point of interest and contention with the new educational requirement surrounds Chartered Financial Planners (CFP) only getting two units of exemption towards the Graduate Diploma, which may be why fifteen per cent of advisers left the industry in 2019 and very few people are now becoming an adviser, potentially leading to an advice gap in Australia, similar to the UK.
Being qualified in both Australia and the UK, one must commend the FCA for the structural governance frameworks they have in place that has been designed for maximising feedback through different industry groups which you would certainly put on the wish list for Australia.
Australian financial services, however, is a very complex environment when it comes down to Governance, Risk and Compliance oversight, and the volume of legislative and regulatory change that has happened over the last few years with the introduction of Best Interest Duty legislation.
This has resulted in penalties that include bans and disqualification orders for any adviser that does not act in the best interests of their clients has made their Governance, Risk and Compliance supervision frameworks and monitoring programs amongst the best worldwide.
As SM&CR evolves in the UK, I believe the regulators will place more of a proactive emphasis on governance, supervision and monitoring frameworks similar to Australian financial services, especially around the suitability of advice (best interest duty in Australia), to mitigate legacy risks and proactively identify future risks.
Although, as I found out in 2016, the challenge is to make sure any supervision and monitoring framework adopts a ‘Proactive,’ enhanced level of governance oversight that goes above and beyond legislative requirements, without increasing administration or duplication at the adviser level.
Turning my attention to, and reflecting on the technology and innovation in Australia and the UK, one can see more innovation embedded in the UK’s operational processes, especially around underwriting point of sale decisions, declines, ratings etc.
For some strange reason, Australia seems to lag behind in this area with paper-based applications or tele-based underwriting the norm which needs to rapidly change if institutions are to create efficiencies in these challenging post-COVID 19 operating conditions.
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