Easing the regulatory burden during a pandemic

3 April 2020

We have heard from the Australian Securities and Investments Commission (ASIC) that it is recalibrating its regulatory priorities to focus on COVID-19 challenges and in light of this it’s worth considering what the focus should really be.

Back in mid-March, ASIC’s Consultation Paper 329 Implementing the Royal Commission recommendations: Advice fee consents and independence disclosure, outlined the corporate regulator’s proposed approach to implementing the recommendations.

In terms of the new fee permissions from clients, the corporate regulator is reported to have said it would be consulting on whether written consent forms would need to include information about the services to be received by the fund member or client under the ongoing fee arrangement, given this could be unnecessary duplication as the consent would often be sought at the same time as an ongoing fee arrangement was being entered into.

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Importantly, the consultation paper was released on 10 March 2020 – before a pandemic was declared and the full extent of the health crisis was revealed. 

Perhaps a consideration now should be, whether written consent forms – and paper copies signed in pen – should be considered at all.

Advice is personal. To date, advisers have for the most part delivered this personal advice in person, at which time clients agree to the fee for the service provided. During the process, paperwork (and lots of it) is touched and pens are provided for signatures. 

There is no doubt that this ‘old school’ measure of compliance was always going to come under scrutiny – given the technological advances of the 21st century and the different electronic options that are available already in many industries and government departments. 

However, the question of whether ASIC’s consultation should be broadened to more virtual consent measures, becomes even more pertinent under pandemic conditions.

The COVID-19 pandemic has brought forward the move to online/virtual contact across Australia and the world. When it comes to adviser meetings with clients – it was eventually going to become more widely used anyway. 

However, the coronavirus has sped up the need for it, and ASIC needs to take that into account now not later.

For a retiree in lockdown in an aged care facility, or even simply choosing not to leave their home and have visitors – a visit from their financial adviser in person is not recommended. 

At the same time – market volatility and a myriad of regulatory changes during this period means good financial advice is more important than ever. 

In this environment, will postal wet signature documents be insisted upon? Or will a verbal confirmation, and subsequent written confirmation correspondence, to the client be considered by ASIC? For those vulnerable clients who have access to email, will ASIC encourage electronic signatures and online conferencing? Considering it is already possible to sign a tax return electronically, encouraging the electronic signing for consent to advice and fees should not be much of a leap. 

There are exceptions however where the regulation prevents the use of these tools. An example of this is Beneficiary Nomination forms which have to be witnessed.

According to the Law Society of NSW, to use electronic signatures and comply with the law for witnessing you need to be physically present at the time the document is signed by the signatory; you need to sign (and know that you are signing) the same document, not a separate copy of it; and you need to sign at the time you witness the document being signed by the signatory. Hence to update the binding death nomination only paper and wet signatures are considered. Ironically, this is a form that is important to keep up to date amongst the aged care community especially in these times of concern regarding the virus. 

We have seen first-hand over the past few weeks, the pace of business’ take up of Zoom and Google Hangouts and other virtual meeting options. Schools are communicating with students via virtual classrooms – and extended families and friends are catching up together by the same means. It would seem obvious that financial advice should be allowed to be delivered in the same manner.

Retirees, in particular, need advice more than ever before to manage their asset values and manage the changes the Government is implementing (such as halving drawdown minimums), not to mention the benefit of the calming assurance provided by advisers in times of financial anxiety. 

Seeing a friendly face over an iPad or computer, or hearing a trusted voice, is an important contact point, especially when in isolation. 

ASIC may need to consider how to support these retirees, and their advisers, in the role of technical support to assist those in lockdown as to how to access and use these electronic tools.

However, while the elderly should be a focus, there is no reason why a more technological form of advice and consents by way of online communications and virtual meetings, shouldn’t be adopted across the board.

Ultimately, whether it be for retirees or accumulators, advisers will need to embrace technology to keep the communications and connections open. And regulators will need to follow suit. 

Electronic signature services, electronic client communications, and online visual call applications are all part of the tools we are embracing in order to comply with social distancing and protecting the vulnerable.  

The fees clients pay for personal advice, platforms and investment will also be under even more heightened scrutiny when asset levels are dropping. 

Investment managers of managed accounts and advisers managing clients’ portfolios, more than ever, need to reduce implementation drag in order to affect asset protection strategies. Technology that allows for bulk transacting intra-day, bulk electronic record of advice for client authority and intra-day execution are critical in volatile times. If you have to amend each client portfolio one by one, produce Records of Advice (ROAs) for each client or wait for 30 minutes for them to produce, if you mail or email them to each client, you are not equitable in your treatment of all clients and can provide advice based on many days old prices. The cost of implementation drag in these volatile markets can be significant. 

Technology now offers the ability for same day and intra-day rebalance of all client’s portfolios. For those with discretion, those same bulk orders can be placed, filled and rebooked to client accounts same day. For those without discretion, all clients can receive electronic ROA for authorisation and same-day execution. 

The workflow integration means advisers and investment managers can focus on the advice, while the technology and service provide compliance (such as ROA authorisation connectivity to trade execution or managed discretionary accountprovider), and intra-day trade execution and liquidity management, plus up to date portfolio holdings, performance and reporting.

As the Dalai Lama said “When you can’t control what’s happening, challenge yourself to control the way your respond to what is happening. That’s where the power is”.
We need ASIC, advisers and all who provide services in the value chain to collaborate for the better and best interests of all Australians.   

Shannon Bernasconi is managing director at WealthO2.




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