The importance of pre-vetting SOAs

Licensees should ensure they pre-vet any advice given, according to Fourth Line, as it is no longer acceptable to conduct retrospective audits.

The risk management and compliance firm said advice should always be reviewed before it was presented to a client as once a Statement of Advice (SOA) had been given, the advice could be liable to breach the Corporations Act.

Up until the point it was presented, any breaches were avertible by fixing problems or issues.

It was no longer sufficient, Fourth Line said, for firms to operate a retrospective audit at a small percentage of past advice by an adviser as the corporate regulator had made it clear licensees were responsible for the quality of advice provided by their advisers.

Joel Ronchi, chief operating officer at Fourth Line, said: “The market-leading, forward-thinking licensees and advice practices have moved, or are moving, to a 100% pre-vet of all SOAs. The technology already exists to make this a reality. The days of waiting 1-2 weeks for licensee pre-vet turnarounds are gone.

“The traditional ‘backward’ looking audit program is no longer fit for purpose. AS the industry moves to a profession, so too compliance must become agile, proactive and forward looking.

“Licensees and advisers need to get ahead of the curve and enforce business processes that check the quality of the advice before it is presented to the client.  It’s not a sign of weakness – it’s a sign of professionalism.”

Meanwhile, Ronchi added that the word ‘compliance’ should be excluded from firms’ vocabulary.

He said: “The word ‘compliance’ should be dropped from the vernacular of the financial advice industry. The focus is really about client engagement, trust and relationships.

“The word should be replaced by the concept of doing the right thing, our conscience and moral compass drives our personal and professional economic engines.”