Technology Selection for Licensees

Tanya Seale, Group Executive Technology Solutions for Centrepoint Alliance

As the number of technology products continues to grow, licensees have their work cut out for them in making the best choice.

Tanya Seale, Group Executive Technology Solutions for Centrepoint Alliance speaks to Miriam Fine at Money & Life, about what to keep in mind when choosing a tech stack to meet the needs of financial advice businesses they serve.

In a financial services career spanning more than 20 years, Tanya Seale has worked across two areas of the advice landscape that have seen extraordinary changes. Starting out in compliance, she’s also worked to support financial planners and businesses towards more efficient practice management and higher quality standards in advice. In her current role as Group Executive Technology Solutions at Centrepoint Alliance, Tanya’s responsibilities include exploring, vetting and procuring software for aligned and self-licensed financial planners.

“My compliance experience gave me the ideal background for exploring the possibilities for technology to enable greater efficiency and a better experience and outcomes from the advice process,” says Tanya. “But it’s equally important for technology to play a vital role in effective oversight by licensees and the regulator. The best solutions integrate effectively with both the advice process and with current compliance requirements.”

As someone who had a ringside seat during remediation proceedings in previous roles, Tanya is very conscious of what’s at stake when it comes to the compliance support and protection that technology can and should provide to licensees. “Technology can be so powerful for monitoring advice and enabling financial planning practices and licensees to be on top of compliance breaches that can result in costly remediation proceedings and outcomes,” she says. “Implementing best-in-class technology is a big part of licensees doing everything they can to keep advice compliant.”

A shift in perception

While technology has clearly advanced in leaps and bounds throughout the last two decades, the COVID pandemic has definitely forced a change in how financial planners perceive the role of technology in their operations. Just like so many other business owners, they’ve had to embrace a client relationship and service model that’s mediated by technology in many ways, from how they run meetings to conducting fact finds.

“Since COVID, client meetings on Zoom and Teams have become widely accepted,” says Tanya. “Before the pandemic, many financial planners took the view that clients would resist the move to remote meetings and digital processes as part of the advice journey. The sudden switch to new practices that have now become the norm for many has made planners think about using other solutions that weren’t a priority before, like digital signatures, for example.”

This stronger drive for practices to have technology at the centre of their client experience has also shifted their ideas about the role of their licensee in providing solutions. “It’s always been important for licensees to offer something to planners in this space,” says Tanya. “Planners want to spend time with clients and having technology to streamline administration can certainly help with that. For planners making their own investment in technology, including the time and effort involved in keeping their software up-to-date, it can take up valuable hours they could otherwise use to meet with clients.”

“It used to be a selling point for licensees to not mandate software“,” she adds. “Now we are seeing planners recognise that by using common technology maintained and supported by the licensee as a base, they can still get access to a wide range of plugins that let them customise and enhance the client experience. Licensees are in a position to negotiate volume discounts and offer the foundations of a system that’s been selected as a good fit for financial advice businesses like theirs.”

It isn’t only financial planners who are welcoming technology as a way to make the advice process work in their favour. The majority of clients are expecting financial planners to switch to an online version of advice delivery. A 2020 survey of more than 1,500 Australians conducted by KPMG reported that two-thirds of financial advice customers would prefer to keep their interactions wholly online, with four out of five of all respondents preferring digital financial services across the board[1]. And in their Advisable Australian 2021 Research Report focussing on the consumer segment most likely to be seeking financial advice, Netwealth found that “the Advisable Australian places great value on a variety of digital wealth services, and financial advice firms need to evolve their digital offering to continue to meet their needs[2].” 

More choice on the market

Fortunately for financial planners, this growing interest from clients in advice firms evolving their digital offering is matched by progress in the number and sophistication of specialised technology solutions on the market. While demand from both planners and clients has stimulated some of this increase in supply, Tanya feels the Hayne Royal Commission played a role with driving forward some of the licensee level monitoring solutions that have been developed.

“If you look back further than five years, there weren’t many providers assisting licensees with a complete solution for client and advice management and compliance,” she says. “One of Justice Hayne’s observations from the enquiry was that big institutions had not put adequate systems in place to monitor compliance by their financial planners and this was a significant failure to exercise their oversight obligations.”

“Today we have a number of third party end-to-end solutions offering this functionality,” she adds. “Some of the bigger dealer groups have taken the DIY route but developing any of these solutions to be effective in delivering the data needed for compliance has been quite the challenge, With a tsunami of changes in regulation, it’s been tricky for licensees and technology providers to keep up with what this means for compliance monitoring and reporting.”

Tanya also points out that the compliance reporting delivered by technology is still only as reliable as the data entered by financial planning teams. “The tech makes it easier for planners to hit their milestones for reporting but it’s still their responsibility to be compliant in how they’re logging their advice process and documents,” she says. “Plus it’s up to the licensee so have the human resources to oversee reports and follow through if there’s an issue. There are Artificial Intelligence solutions being tested to bring more automation to compliance monitoring. But with the best interest duty requirement, at some stage you need a human to look at the advice and judge whether that duty has been exercised.”

Shopping around: Six tips for technology selection

Tanya shares some things to consider when looking for software solutions that are a good fit for your business and financial planners, whether they’re employed or authorised representatives.

1. Define your goals

The starting point should always be what are you solving for and what are the key things you want the software to do? Is it a new customer relationship management (CRM) system to help planners with better business development and communication or modelling tools to support the advice process.

2. What’s the ROI?

As part of this process of deciding what the technology can do for planners, consider the cost vs the return on investment (ROI). Technology introduces short-cuts and automation which means efficiency gains for financial planning businesses so try to give these a dollar value to understand if a product is worth it’s price tag. And if a solution can save time on a process then it’s worth more to a planner if it’s something they do more often – like reviews for example.

3. Take stock of your resources

Choosing the right product and vendor also comes down to how much time and resources you have available to provide support for your tech stack. Are customisable solutions better for your planners? For example, is the look and feel of an SOA important enough that they’ll be prepared to spend time customising it or is an out of the box solution a better option. Do you have an employee who can support planners with using the technology or is this something your vendor can do?

4. Look for flexibility and service

For expensive foundation technology like a CRM it’s important to know what integrations are available. Does it have open architecture that will enable it to fit together with other solutions you already have and future technology you’ll want to make use of? Is it easy to deal with the provider and are they well-established in the industry so you can expect them to be around for the life of the product with your business and planners?

5. Test and compare

Trying before you buy is really important. Ask for a login to a test site to play around with each app and make sure it’s working as expected. If it’s a larger system, explore the different modules to check the does everything it says it will. Trialling different solutions, whether large or small will give you a better picture of what’s available so you know you’re getting technology that’s the best fit for your planners and the compliance information your business needs.

6. Check for security and compliance

Many apps and the data they gather are now cloud based. Check if their standards for data encryption, security controls and privacy are in line with your own privacy policy and industry recognised standards like the ISO standards in data security. Most of the cloud service providers – Google, Amazon Web Services and Azure –   have the highest standards of in-built security and monitoring, but it should be part of your due diligence to check this out before settling on a solution.

Can one solution work?

With more individual tools to support specific stages in the advice process and back-office tasks, as well as out of the box end-to-end software packages, what are the benefits of choosing a single complete solution over building a bespoke suite of tools from different providers? Tanya says that licensees can expect pros and cons for cost and flexibility, regardless of which path they take.

“A single solution can offer a more seamless experience for the user,” she says. “It can create a data set you can rely on a single source of truth with less redundancy. It can also be more cost-effective when you’re paying for just the one software license. However, there may be some modules that are better than others in an end-to-end solution. And having one product that does everything can make it really hard to transition to something new if your needs should change. The hassle of migrating data from one system to another can effectively lock you in to the one you’re using now.”

“What we’re starting to see is licensees building their stack around a core CRM and then selecting best of breed plugins from other providers or choosing from optional add-on modules from the same provider,” she adds. “With this approach it’s important to have an API with sufficient integration to pass all the necessary data back and forth between apps and modules. And it can take time to set up and check that everything is working as it should.”

Costs can also creep up gradually with this DIY approach to building a more bespoke technology offer for planners. “This is also the case for plugins for your base system,” says Tanya . “When these are priced as optional extras they can quickly get out of control. The cost can be worth it if planners can get that quantum in efficiency as a result.  But they can sometimes struggle with the change management it takes to get everything working. A new tool might seem like one that’s going to give planners a cool client feature that’s really useful and flexible. And then it ends up never being used.”

RI and ASIC: a watershed case for technology and licensee responsibilities

What’s been happening

In August 2020, ASIC started court proceedings against RI Advice Group Pty Ltd, an Australian Financial Services (AFS) licence holder, following alleged cyber breach incidents at certain authorised representatives (ARs) of RI in 2017 and 2018. They allege that RI failed to have implemented (including by its ARs) adequate policies, systems and resources which were reasonably appropriate to manage risk in respect of cybersecurity and cyber resilience.

ASIC is seeking three outcomes from the proceedings:

• Declarations that RI contravened provisions of the Corporations Act, specifically sections 912A(1)(a), (b), (c), (d) and (h) and (5A);

• Orders that RI pay a civil penalty in an appropriate amount to be determined by the Court; and

• Compliance orders that RI implements systems that are reasonably appropriate to adequately manage risk in respect of cybersecurity and cyber resilience and provide a report from a suitably qualified independent expert confirming that such systems have been implemented.

At the time of writing the matter was relisted for mediation on 24 March 2022 and then a trial commencing 4 April 2022.

What this could mean for licensees

If the court finds against RI Advice in contravening the Corporations Act section 912a, this sets a new benchmark for the scope of licensees’ responsibilities for cybersecurity. It suggests that licensees will need to go beyond the practice of providing guidance to ARs on cybersecurity best-practice and introduce required standards and regular auditing to ensure they’re not at risk of facing the same charges as RI Advice.

“We’re all watching the RI case closely, waiting to see if licensees responsibilities for cyber security will extend to the operating systems of authorised representatives,” says Tanya.

A baseline for security

Depending on the outcome of ongoing court proceedings brought by ASIC against RI Advice for breaches of Section 912a of the Corporations Act, the scope of licensees responsibilities for planners’ technology standards could be about to change. “Section 912a says licensees must have adequate financial, technological and human resources to provide the financial services covered by their licence and to carry out supervisory arrangements,” she says. “This case could change what is considered adequate when it comes to technological resources.

“Until now, most licensees have taken responsibility by providing guidance on best-practice to reduce risks associated with technology – offsite data back-ups, email filters, staff cybersecurity training and two-factor authentication for planners and clients, for example. But if we see licensees being held responsible for cybersecurity breaches experienced by planners running their own business and IT infrastructure under their license, this could lead to a much more rigorous approach the licensee will need to take. We may see licensees providing locked down technology systems as part of licensing arrangements or auditing businesses for compliance with cybersecurity standards.”

[1] KPMG Australia survey, May 2020

[2] Netwealth, The Advisable Australian Report, 2021

*Originally published in Money & Life