FSC admits to dropping the ball on soft dollar

In an attempt to comply with industry standards, many financial planning groups have been over-reporting on their alternative remuneration registers, causing the Financial Services Council (FSC) and Financial Planning Association (FPA) to step up their act on educating members.

FSC chief executive John Brogden (pictured) said the FSC and the FPA, which are the joint regulators of the standard, had found there was clearly a level of misunderstanding within the industry about what needed to be reported.

“We have no reason to believe that there’s any malice involved … But we appreciate that this inconsistency is unacceptable and our objective is to ensure that we do have full compliance, and that’s the path we’re taking as a matter or urgency,” Brodgen said.

There is a consensus among many members of the industry that despite having clear guidelines, there are often grey areas where it is unclear whether a record needs to be kept.

Some err on the side of caution and over-report rather than risk being non-compliant, while others “follow the standard more closely”, according to ANZ Wealth spokesperson Peter Hansen.

It is for this reason that when comparing registers between licensees and fund mangers, for example, there are often discrepancies between registers on payments made and received, which Brogden admitted “confuses matters”.

He believes that since the introduction of the FSC’s Standard 14, which outlines soft dollar registers, the staff who were initially briefed on how the registers work have moved on.

“We’ve not been maintaining a briefing program, and as staff have moved on, people haven’t handed down the knowledge of how these registers work,” he said.

To resolve the problem, the FSC and the FPA have agreed to establish an ongoing education program that will involve regularly briefing members on the registers, as well as other standards.

The FSC has created a working group that will be taking recommendations to its board meeting in April about what the program will look like.

“Fundamentally it’s our standard, and while our members must comply, we have to make sure that it’s as easy as possible for them to comply,” Brogden said.

“We have a genuine commitment to transparency and we’ve fallen down on that by not ensuring that our members are briefed on a regular occasion, so we’re moving to rectify that situation in the first half of this year.”

The necessity of the registers has also been questioned by some industry players, who suggest that the number of requests for licensee registers by interested clients is quite small.

Brogden replied to these concerns with an analogy: “It’s a bit like: Should you stop for a red light at 2:00am when there are no other cars on the road? The answer is yes.

“[Just] because nobody has been asking for them … doesn’t mean they shouldn’t be available to the public, particularly to prospective clients, whenever they want them,” he said.