Compliance or Priorities?

I love Monty Python humour.

Remember the crucifixion or freedom skit from “Life of Brian”?  Michael Palin playing the whimsical centurion questioning a line-up of captives regarding their fate or freedom.

Many financial advisers seem to have become captives.

Captives of compliance.

Compliance burden.

Is compliance the burden it appears to be?

An adviser told me last week if her doctor had the same compliance requirements as financial advisers, every drug prescription would require a list of alternatives, with pros and cons and reasonable justification for a ‘disinterested person’ to conclude the treatment warranted.

Sounds ridiculous.

The compliance cart has bolted from the horse.

It is driving up the costs of advice.

There seem to be two basic types.

The first is butt-protection.

This is when licensees conduct thorough ‘look-backs’ on every file for every adviser.

Having staggered through the headlines of the Banking Royal Commission, these groups justify the paperwork blitzkrieg as an alignment exercise with the ‘best interests’ of their clients. More like the best interests of their shareholders sick of falling share prices.

It’s like diverting water supplies away from real bushfires – the COVID-19 trauma facing their clients and loved ones – to focus on risk management – reputational risk for institutions who for years sold product masqueraded as advice.


The second type of compliance is what I call ‘flat-earth’ compliance.

The ‘flat-earth’ compliance believers consider advice as just another product.

They also probably believe that teachers, nurses, judges, accountants, and lawyers all provide a product. It’s an understandable perspective because it has been fundamental to their livelihoods for decades.

But it’s not fundamental to adviser’s livelihoods most of whom strong supporters of compliance that supports ’round-earth’ beliefs.


The ’round-earth’ advisers did not become advisers to sell products.

They became advisers to help their clients lead better financial lives.

The value of their advice is about the impact it has on the client’s lives, nothing else.

Products have a role to play, like the scalpel in the hands of the skilled surgeon. The value isn’t the scalpel, nor the surgeon’s skill; it’s the impact created for the patient.

Herein lies the opportunity for advisers to survive and thrive beyond today’s compliance frenzy imposed by flat-earth and butt-protection compliance thinking.

Prioritise impact and value created over compliance.

That is while abiding by compliance guidelines, focus on the clients for whom the firm makes the most significant impact.

Don’t confuse impact with product.

High impact doesn’t mean lots of product. It means value to clients. For instance, advisory firms can have clients with little assets while providing significant impact and have clients will lots of assets and creating little impact.

Compliance is fundamentally re-writing advisory firm client segmentation models turning product-linked models to value and impact-based models.

Clients for life?

Shifting to value-based segmentation models is incredibly tricky for advisers who believe in a ‘client for life’ model.

Ironically, the success of the ‘client for life’ model creates enormous costs on the livelihoods of advisory teams as they try to be all things for all clients. It was also the model of choice supported by fast-exiting institutions who knowingly inflated buyer-of-last-resort firm business valuations based upon the level of fees and in-force policies.

The value-based segmentation model is particularly difficult for regional advisory firms where there is often fewer or no available alternatives locally.

Fundamentally, the driver for a value-based segmentation model is the client’s best interests.

For those clients that the firm provide lesser impact and value, it is in the client’s best interests to relocate to an alternative offer who can better serve their best interests. Easy to say, hard, but not impossible to do – unfortunately, growth opportunities rarely come gift wrapped.

The obvious exception to this approach is pro bono clients – that 10% of a client base that the firm decides to care for regardless of fee. Any more than 10% of the client base and the firm’s founders will become pro bono candidates.

Advisers can control impact and value – they can’t control the increasing compliance burdens created by decades of financial product distribution pretending to be financial advice.

First Principals

The difference between a productive and over-worked advisory firm is their priorities.

Some firms subject to ‘look-backs’ campaigns have little choice or control over their priorities, except to plan their next steps once through.

Despite workloads, uncertainty, and unanswered questions regarding new code of ethics guidelines, these are the best of times for those growth-minded advisers seeking to build valuable advice firms of the future.

These are the times to return to the first principals why advisers become advisers – to provide the most value and most impact in the lives of their clients – and recognise that the compliance burden, however ridiculous, is an inevitable phase towards the separation of financial advice from the financial product.

Execution or freedom?

What do you reckon?




Photo Credit: istock_91698445



For over 30 years, Jim has influenced, coached, and consulted to advisory firms across Australia. His firm, Certainty Advice Group coaches, trains and is building a growing Advice Group of firms delivering comprehensive, unconflicted advice, priced on value and impact provided. The community of advisory firms align with Australia’s highest and only ACCC/IP Australia Certification Mark standard of comprehensive, unconflicted advice – Certainty Advice. He is also an author and keynote speaker.

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