Aligned Licensee- Practice Servicing Assessment Procedure ... · • Sascha Warner, Senior Manager Operational Excellence • Confidential ESCALATION POINTS ... (PDM) within the first

Aligned Licensee- Practice Servicing Assessment

Procedure Guide

OPERATIONAL EXCELLENCE TEAM

Procedure Owner: Sascha Warner

Author(s): Kathryn Readshaw

Date: 15/08/2017

Version V0.1

Document Classification: Internal

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Internal

TABLE OF CONTENTS

GENERAL INFORMATION 3

COMPLETING THE PSA IN THE ADVISER HUB 5

GUIDANCE TO PERFORM THE PSA 6

1.1 RELATIONSHIP MANAGEMENT 6

1.2 PRACTICE MANAGEMENT 10

1.3 RISK AND COMPLIANCE 17

1.4 HOUSEKEEPING 20

DETERMINING THE PSA SCORE 23

PSA SCORE SCENERIOS 26

1.1 EXAMPLE ONE 26

1.2 EXAMPLE TWO 27

1.2 EXAMPLE THREE 28

PUTTING A PRACTICE ON THE LICENSEE WATCH

LIST VIA PSA 29

1.1 WHAT IS AN ON WATCH LIST? 29

1.2 POSSIBLE AREAS OF CONCERN 29

ACTION FOLLOW UP 32

WHERE TO GET HELP? 33

VERSION HISTORY 34

PROCEDURE ADMINISTRATION 35

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GENERAL INFORMATION

Internal

GENERAL INFORMATION

PROCEDURE OVERVIEW

The purpose of this document is to provide guidance to Supervisors to assist in the completion of

a Practice Servicing Assessment (PSA).

The PSA is a review conducted by a Supervisor on the Practice’s overall risk profile.

The aim is to identify business activities and other impacts/ stressors that might lead to a

change in the ethical behaviour and increase risk to the licensee such as –

• High, unexplained staff turnover

• Vices – gambling, lifestyle beyond ones means

• Marriage break up

• Partnership upheavals

• Excessive business and/or personal debt

• Co-mingling or getting involved in advice unknown to the licensee and not immediate

apparent to the team

The focus of the PSA is on the potential red flags, which signal closer and more frequent monitoring and therefore inclusion on the Licensee Watch List, which is reviewed every month in

the Risk Event Forum (REF).

The outcome of a PSA is an overall risk assessment rating between 1-5.

A rating between 1-3 demonstrates an acceptable risk profile for annual supervision and a rating between 4-5 will be escalated via the Risk Event Forum and inclusion on the on the Licensee Wat

List for heightened supervision.

Once the PSA is completed, the Supervisor must identify any actions that need to be addressed

to mitigate against any potential risks within the Practice. These actions are recorded in the PSA

(in the Adviser Hub) and must have due dates.

The completion of the PSA and any actions are tracked and monitored to ensure completion in a

timely manner.

EXCLUSIONS

Not applicable.

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FREQUENCY

At a minimum, a PSA will be performed at least on an annual basis by the assigned Supervisor.

In the event the Practice is put on the "Watch List", the requirement moves to a bi-annual basis.

BUSINESS UNIT CONTACTS

The business unit contacts are

• Sascha Warner, Senior Manager Operational Excellence

• Confidential

ESCALATION POINTS

• Adrian Kwa, Head of Programs and Performance Confidential

• REQUIRED SYSTEMS ACCESS

• Adviser Hub

• Adviser Website

REQUIRED APPLICATIONS

Not Applicable.

Internal

5

COMPLETING THE PSA

IN THE ADVISER HUB

Internal

COMPLETING THE PSA IN THE ADVISER HUB

The Adviser Hub is a repository of practice and adviser data covering RI Advice, Millenium3 and Financial Service Partners.

The PSA and any subsequent actions need to be completed in the PSA module within the Adviser Hub.

For detailed instructions on how to complete a PSA within the Adviser Hub –

• Log onto the Adviser Hub -

https://adviserhub.lightning.force.com/one/one.app?source=aloha • Refer to Adviser Hub training documents within the Libraries

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GUIDANCE TO PERFORM

THE PSA

Internal

GUIDANCE TO PERFORM THE PSA

The following guidance notes provide practical guidance for Practice Development Manager on

the completion of the Practicing Servicing Assessment.

Any “No” response requires an action to be raised with a description, task status and due date.

Please note, an action can also be raised for a “Yes” or an “N/A” response

All questions need to be completed.

The Supervisor is encouraged to retain and upload notes into the Adviser Hub to support the

completion of the PSA.

1.1 RELATIONSHIP MANAGEMENT

1 Is this a new Practice or a new adviser joining a Practice? If yes has/have

they been through the licensee induction program?

� This question applies to any adviser who has joined the Practice since previous PSA

� A requirement of an Adviser joining a Licensee is the participation and attendance in the

Induction Program. The induction program has four (4) components;

1. Adviser Induction Module: Self-paced module to guide an Adviser through the key

information and processes relevant to the licensee. The module should be completed

with the Practice Development Manager (PDM) within the first 90 days of joining the

Licensee. Upon completion, both the Adviser and Practice/State Development Manager

are required to sign the declaration to confirm completion. This will be added to the

Advisers training register and CPD points will be awarded.

2. Induction Workshop: A 2 day face to face workshop outlining the support services

available to the Adviser/Practice and detailing Licensee specific advice processes. It is

recommended that this is attended within the first 90 days of joining the Licensee

where possible.

3. All new starters are required to complete the ‘ Licensee Advice Standards

Accreditation’ via the Learning Management System (LMS).

4. Complete any specialist accreditations depending on the Licence type applied for

� Check the most recent “RI/FSP/M3 Outstanding Induction Requirements” email from the

Adviser Development team and confirm the above requirement has been met for any new

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Practice and/or Advisers. An example is as follows –

2 Does every adviser and staff member know where to find the licensee

business rules and various advice standards?

� This question confirms Advisers within the Practice, have access and know where to locate the

business rules and Advice Standards on the Licensee website.

� This confirmation can be completed by asking for a demonstration of website use or applied

via previous knowledge of practices demonstrating access

� The standards can be found on the relevant Adviser site as below –

FSP https://fsp.ytml.com.au/professional-standards-business-

rules/Professional%20Standards%201_1

RI https://retireinvest.ytml.com.au/home/professional-standards

M3 https://m3.ytml.com.au/professional-standards-and-business-rules

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GUIDANCE TO PERFORM

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3 The Practice has NO open questions on the licensee rules that still require

clarification? Is this a correct Statement?

� This question confirms Advisers within the Practice, do not have any questions/queries on the

licensee business rules and Advice Standards.

� This confirmation can be completed by asking Advisers if they have any outstanding queries

and/or contacting Professional Standards to confirm there are no outstanding queries for the

Practice

� Futher information can be found on the relevant Adviser site –

FSP https://fsp.ytml.com.au/professional-standards-business-rules/Professional%20Standards%201_1



4 Is the Practice aware of the Licensee’s Incidents and Complaints policy and

reporting requirements?

• This question confirms the Practice are aware of the The Licensee’s incidents and Complaints

policy and reporting requirements

• This can be completed by checking the registers held by the Practice and comparing it against

the register held by the Complaints and Incidents team

• Request the Adviser/s provide a definition of an incident and a complaint

• Futher information can be found on the relevant Adviser site –

FSP https://fsp.ytml.com.au/professional-standards-business-rules/psbr-home

RI https://retireinvest.ytml.com.au/home/professional-

standards/Complaints%20and%20Incidents

M3 https://m3.ytml.com.au/professional-standards-and-business-rules/professional-standards

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5 Is the Practice aware of the value and content of the Licensee adviser

website?

� This question confirms the Practice are aware of the Licensee Adviser website

� This can be completed by –

o The practice has an up to date login and regularly uses the site to find important

information and resources relative to their business practices including; advice tools,

FOFA regulation updates, HR management tools and marketing tools

o Ask Adviser/s what they have used the website for recently

� Access to Licensee websites -

FSP https://fsp.ytml.com.au

RI https://retireinvest.ytml.com.au/sign-in

M3 https://m3.ytml.com.au/home

6 The Practice is aware of the value and content of the regular licensee

newsletter communication and there is a process for distributing or person

responsible for disseminating licensee communication

8 The Practice has a process in place to ensure the right people in the

business read and are aware of the contents

� This question confirms the Practice and it’s Advisers are aware of and receiving the regular

licensee newsletter communication. ie Millenium3 Bulletin, RI Report or Focus Point

� This can be completed by –

o Checking the newletter is included in the agenda (for larger practices) of their regular

practice meeting

o Asking open ended questions regarding recent content to enable demonstration of

knowledge

� View evidence of recent implementation of Action items in the newsletters

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1.2 PRACTICE MANAGEMENT

7 The Licensee has up to date email addresses for distribution of the

newsletter to the Practice.

� This question confirms Practice and it’s Advisers are receiving the regular licensee newsletter

communication. Ie Millenium3 Bulletin, RI Report or Focus Point

� If not, contact the Licensee Marketing team to update email address for distribution pruposes

� In addition, the Practice can add/remove team members from the distribution list by using the links at the bottom of the weekly newsletter. Example

9 The Practice has agreed with the PM the resources it will need to access

from the shared services including, Marketing Advice, Practice

Management, succession planning

� This question confirms the Practice has adequate access to shared services, that they are

available and are providing the ncessary support/service to a practice

� Review activity plans/mandate from practice visits and confirm whether shared services have been engaged

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GUIDANCE TO PERFORM

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10 All internal and external office signage is in accordance with licensee brand

and disclosure requirements and standards

11 All business stationery including business cards, letterhead and electronic

stationery follow the licensees prescribed branding guidelines and

disclosure requirements

12 Branding is consistent with the nominated brand strategy and is consistent

across all elements of its stationery and marketing materials

13 Licensee advice documents follow the licensee brand and disclosure

requirements and clearly identify both the business entity and authorising

licensee responsible for the advice

14 Separate business stationery exists for each business entity with each

containing the correct individual business disclosure

15 The Practice website design, disclosures and content has been approved by

the licensee, particularly when a practice is not using the approved

standard templates

16 Where social media links are present, the content has been and is regularly

reviewed by the licensee/compliance

17 All promotional and marketing material has been approved via the licensee

� These questions confirm the Practice’s signage, business stationery, branding, website

material, social media is in line with the licensee prescribed guidelines

� This confirmation can be completed by visual observation of signage, business stationery, practice website, social media outlets etc

� Further information can be obtained on the relevant licensee website.If you are not already familiar with the Corporate Identity Guidelines on the DG websites please read them and draw the attention of advisers to them if they are not familiar with them –

FSP https://fsp.ytml.com.au/marketings/brands

RI https://retireinvest.ytml.com.au/_doc/3327/Brand%20Style%20Guidelines.pdf

M3 https://m3.ytml.com.au/_doc/5239/Millennium3%20Brand%20guidelines.pdf

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18 The Practice has used approved licensee templates to document all referral

relationships, paid and where unpaid there is no soft dollar or conflicts

19 The practice has disclosed its ownership, directorships or involvement with

other businesses so that you are ware they are operating additional

business’s

20 The Practice keeps its associated business activities clearly separate from

its financial advice business

21 You are satisfied there is no evidence that the Practice engages in

prohibited business activities

� These questions confirm any associated business activities are in line with the Licensee

guidelines

� This confirmation can be completed by –

o Checking examples of templates including disclosures

o Checking relevant registers ie Soft dollar register, Conflict of Interest register

o Confirming business signage and stationery is separate from financial advice business

o Based on information gathered regarding other business activities, asking open ended questions in relation to discussions or referrals between parties to enable your satisfaction that the practice is not engaging in prohibited business. Prohibited business could include getting clients to lend to, or invest in a non-approved related party, property or investment scheme business which the adviser owns, or other

associated businesses that may cause the adviser to not satisfy their best interest duty to the clients or which may cause disrrepute to the brand and/or licensee.

� Further information can be obtained on the relevant licensee website, including Associated Business and Conflict of Interest Standards.





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GUIDANCE TO PERFORM

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22 You are satisfied that the advisers and/or practice owners are not

exhibiting signs of being under financial stress due to excessive personal or

business debt.

23 You are satisfied that there are NO obvious signs that the

principal/advisers are living a lifestyle beyond the stated/reported licensee

generated income.

24 You are satisfied that the practice does not experience excessive and

frequent staff turnover.

� These questions confirm the Adviser/s and/or the Practice are not under any finanical stress,

living a lifestyle beyond the stated licensee generated income etc

� There are a number of potential indicators to consider when making an assessment. These include -

� Personal issues e.g. medical, financial

� Changes of key staff and/or high staff turnover

� Signs of financial stress –Debts and liabilities

� Decline in Advice Assurance Rating – what is the underlying issue

� Adviser being raised to the Consequence Management Forum (CMF) or submissions to

the Advice Review Team (ART)

� Sudden drop or increase in revenue

� Prioritising other business interest above their advice business (eg mortgage broker,

general insurance, accountant)

� Rapid growth of practice

� Lack of engagement, including not responding to emails or phone calls

� More than two at fault complaints regarding the same issue within the same 12 month

period

� Not attending Licensee events and/or not meeting CPD points (unless valid

extenuating circumstances)

� Advisers/practice with a major incident

� Continued non adherence to licensee direction and or standards. (Numerous exception

requests on file)

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GUIDANCE TO PERFORM

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25 The practice has defined clear roles and responsibilities and documented

these as job descriptions. Staff understand their roles and measures of

success in terms of expected KPI's.

� This question confirms the Practice has clearly documented roles and responsibilities.

� Discuss roles and responsibilities with principal and staff members to determine that understanding is the same and that this matches the job descriptions that are documented

� Further information can be obtained on the relevant licensee website

FSP https://fsp.ytml.com.au/hr-templates

RI https://retireinvest.ytml.com.au/home/Practice%20Development/best-

practice

M3 https://m3.ytml.com.au/practice-management/people-management

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GUIDANCE TO PERFORM

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26 Employed adviser remuneration arrangements / structures and reward

systems follow licensee guidelines and do not breach conflicted

remuneration rules.

� This question confirms the Adviser remuneration arrangements/ structures/ reward systems

are within guidelines

� Review Adviser remuneration arrangements/ structures/ reward systems to determine that they do not breach Conflicted Remuneration rules

� Review Practice Alternate Remuneration register

� Conflicted Remuneration is any benefit (monetary or non-monetary) given to a licensee or adviser that could reasonably be expected to influence the financial product advice given to a retail client.

� Examples include –

o Upfront and trailing commissions on superannuation, investments and platforms, annuities and pensions, paid by a product issuer to a licensee

o Soft-Dollar Benefits, now known as “non-monetary benefits”, from fund managers, platform providers and life companies. ie lunches, hospitality,

o A discount on fees paid by a licensee based on the volume of client funds held in a particular financial product.

o Equity arrangements involving giving shares or other interests in the licensees’ business.

o Volume-based payments

� Further information (including the conflicted remuneration standard) can be obtained on the

relevant licensee website



RI https://retireinvest.ytml.com.au/_doc/5634/Conflicted%20remuneration%2

0standard.pdf

M3 https://m3.ytml.com.au/_doc/5633/Conflicted%20Remuneration%20Stand

ard.pdf

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GUIDANCE TO PERFORM

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27 The Practice Advisers and support staff have been made aware of the

importance of Privacy / Information Security and this is reflected (as can

be observed by the PM) in physical premises security, client file

management , appropriate IT security, secure email addresses, client paper

file control and system data back-up & security and good password

integrity and (uppercase/ lowercase alpha-numeric etc. ) and made the

practice aware of modern IT threats such as email hijacking, client

impersonations, phishing, client data on USB sticks etc.

28 Additional diligence regarding privacy, should be in place where there is a

multi-business strategy i.e. shared ownership of accounting, financial

planning and mortgage broking businesses or overseas outsourcing.

Shared ownership does not = shared client data or files. The privacy

arrangements relating to this will need to reflect the licensee guidelines.

Overseas providers need to attest to the Practice that they will follow the

Australian Privacy Principles as they are not subject to Australian Law

� These questions confirm Advisers and support staff are aware of the Privacy/ Information

Security requirements

� This confirmation can be compleetd by visual observations ie physical security of premises, security of hard copy files

� As per the appendices in the Privacy Standard, sight the following key documents –

o Privacy Checklist

o Relationship Self Assessment

o Internal Practice Training declaration

� Ask where backups are stored, regular virus check, access (physical and electronic) to client

information within the office, especially with associated businesses

� Further information can be obtained on the relevant licensee website in the Privacy Standard



RI https://retireinvest.ytml.com.au/home/professional-

standards/Professional%20Standards%20and%20Policies

M3 https://m3.ytml.com.au/professional-standards-and-business-

rules/professional-standards

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1.3 RISK AND COMPLIANCE

29 Core issues resulting from the audit have been addressed by the

Practice/adviser.

30 The Practice/adviser has made changes to existing processes (i.e.

introduced new processes, (checklists/systems) including any coaching

required by you to reduce the probability of reoccurrence

� These questions confirm issues resulting from audits have been addressed by the

Practice/Adviser

� This confirmation can be completd by checking any core issues raised in Advice Quality reviews have now been addressed by the Adviser/Practice. Request examples.

31 There are no advisers in this practice on Pre-vet. If there are any, please

document in the notes why this is the case i.e. as a result of Remediation,

they are newly appointed or an existing adviser gaining further

accreditations.

32 The advisers in question are progressing toward coming off Pre-vet.

� These questions confirm there are no Advisers on Pre-vet or are working towards coming off Pre-vet.

� This confirmation can be completd by checking whether Adviser/s within the practice are on pre-vet using Adviser Hub and Practice dashboard. If so, document the reason ie new Adviser, result of remediation, existing Adviser gaining further qualifications

� Remind Advisers what they are on Pre-vet for and discuss options on how to get off Pre-vet. If not satisfied, raise an action and track until completion

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GUIDANCE TO PERFORM

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33 The practice uses the Licensee approved SOA/ROA/ Fact Find tools. Where

a practice uses their own “advice documents”, they have had these

approved by the licensee and have a process in place to ensure they keep

up to date with all licensee disclosures and amendments. Their current

advice documents are up to date. The business is using the latest version of

the FSG.

� This question confirms the Practice is using the Licensee advice documents or hold the

appropriate approval to use their own documents.

� This confirmation can be completed by -

o Obtain confirmation from Professional Standards and subsequent register, if the Practice has their own “advice documents” approved by the Licensee.

o If not approved, raise an action and provide the Practice with guidance on the process to obtain approval


FSP https://fsp.ytml.com.au/advice-documents-templates/advice-templates-

soa-roa-text/non-standard-advice-templates

RI https://retireinvest.ytml.com.au/home/advice-

process/SoA,%20RoA%20and%20other%20client%20docs

M3 https://m3.ytml.com.au/advice-documents-and-templates/advice-templates-and-materials

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34 You are satisfied that the Practice is demonstrating genuine efforts to meet

ongoing service arrangement commitments

35 The practice has a documented and defined ongoing service proposition

(OGSA). The Practice uses the standard Licensee OGSA template as it

ensures the licensee is the fee recipient

36 OGSA agreements are in place for all active clients due an FDS. Those on

historical implied or unchanged Pre 1 July 2013 arrangements where advice

was provided under the current licensee before 1 July 2013 are being

actively engaged by the practice ...AND those acquired clients or new

practices where the advice Pre or Post 1 July 2013 was NOT provided under

their current licensee (M3, FSP, RI) have not materially changed -

37 The practice understands that their Supervisor and licensee must review

any changes to the OGSA & FDS to ensure they are appropriate in terms of

what services are delivered, the Practices 's capacity to deliver and that the

Practice's Disclosures are correct

38 You are satisfied that where client books have been purchased by the

Practice the implications of Opt-In have been considered for each client and

the outcomes are consistent with the Opt-In Decision Tree contained in the

Opt-In Practice Guide.

� These questions confirm the Practice is demonstrating efforts to meet ongoing service

arrangement commitments

� This confirmation can be completed by –

o conducting a sample check (guidance is between 5-10 clients) of FDS and Opt-in clients and confirm ongoing service arrangements commitments have been fulfilled. Retain notes on the client files reviewed

o check systems and processes for meeting Opt-In obligations

o view OGSA documentation and FDS templates

� Further information can be obtained on the relevant licensee website in the Professional

Standards and FoFA sections including the Annual Fee Disclosure and Opt-in Standard and

the Annual Opt-in Process Guide

FSP https://fsp.ytml.com.au/_doc/7229/Opt-in%20Guide.doc

RI https://retireinvest.ytml.com.au/home/professional-standards/FoFA

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1.4 HOUSEKEEPING

M3 https://m3.ytml.com.au/professional-standards-and-business-rules/FOFA

40

39 The advisers can demonstrate evidence of clear and contemporaneous file

notes of their documented investigations that back-up their product

research that under-pins their recommendations

� This question confirms the Advisers within the Practice can demonstrate clear and

contemporaneous file notes.

� This confirmation can be completed by selecting a sample of client files (guidance is between 5-10 clients) to demonstrate Advisers file notes are clear and back up their product research that underpinned their recommendations. Retain notes on the client files reviewed


FSP https://fsp.ytml.com.au/advice-documents-templates/advice-templates-

soa-roa-text/non-standard-advice-templates

RI https://retireinvest.ytml.com.au/home/advice-

process/SoA,%20RoA%20and%20other%20client%20docs

M3 https://m3.ytml.com.au/advice-documents-and-templates/advice-templates-and-materials

40 The Practice uses and maintains all the appropriate Registers, Do not call /

Opt Out of Communications Registers, Soft Dollar – Conflicts of Interest,

Incidents and Complaints that were reported to the licensee

� This question confirms the Practice uses and maintains all the appropriate registers.

� This confirmation can be completed by sighting the appropriate registers used and maintained

by the practice ie Do not Call/Opt Out of Communication, Soft Dollar – Conflict of Interest,

Complaint registers

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FSP https://fsp.ytml.com.au/professional-standards-business-rules/forms-

registers

RI https://retireinvest.ytml.com.au/home/professional-standards/Registers

M3 https://m3.ytml.com.au/professional-standards-and-business-rules/forms-and-registers

41 The practice has "no" advisers under PM “coaching” due to a poor Advice

Assurance rating. Is this a correct statement?

42 If any adviser is under "coaching", the adviser is responding?

� These questions confirm the Practice doesn’t have any Advisers under PM coaching due to a

poor Advice Assurance rating.

� This confirmation can be completed by confirming with the Professional Development team

that there are no advisers receiving “PM” coaching or Advice Coaching due to a poor Advice

Assurance rating

� If so, obtain confirmation from relevant Advice Coach that the Adviser/s are responding to

additional coaching

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43 No adviser in the Practice acts under an open-ended client authority

and/or holds a POA over a client's assets. Is this a correct statement?

� This question confirms that no Adviser within the Practice acts under an open-ended client authority

� The confirmation can be completed by confirming with proprietor that Advisers within the Practice do not act under an open ended client authority and/or holds a POA over client’s

assets

44 The whistle-blower policy is clearly understood by all practice staff.

� This question confirms the whistleblower is clearly understood by all practice staff

� The confirmation can be completed by asking related Whistlblower policy questions to determine their undertstanding




RI https://retireinvest.ytml.com.au/_doc/4115/Whistleblower%20Standard.pdf

M3 https://m3.ytml.com.au/_doc/4432/Whistleblower%20Protection%20Standard.pdf

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DETERMINING THE PSA

SCORE

Internal

DETERMINING THE PSA SCORE

Step 1

Once all the questions have been completed, a Practice Development Manager is required to assign the practice a PSA score. Using the Risk Matrix Guide below, assign the Practice a Risk Assessment Score.

RISK MATRIX GUIDE

1 Operating well within acceptable licensee parameters - simple business model no visible risks evident. Supervisor may not have visibility of personal and or business debt position due to the adviser not sharing this or other personal information

2 As per 1 plus but may have some personal or business financial stress (loan) issues BUT seems able to meet obligations. You may not have any or a complete visibility of personal debt position due to the adviser not sharing this or other personal information.

3

As per 2 has some personal and / or business financial stress (loans) issues, seems able to

meet obligations, is not easy to get close to and is a closed book, may be in the frequent habit of cancelling your appointments, or may be growing faster than the norm but still a quality practice, trading their way clear of debt. May have a complex business structure but seems clearly separated from your Licensee AFSL - no comingling evident

4

You have become aware or have a strong suspicion they may or do have a combination of one or more of the below factors:

• has issues noted in point 3 plus, excessive growth or expansion, debt potentially impacting the business (unpaid tax , reducing or eliminating /turning staff over) but

has a clear vision and is committed to working toward getting back to financial strength; and/or

• could be a multi disciplined business where the proprietor/s or directors are distracted by "other" business interests or acquisition integration, or this practice has major or emerging issues with support staff and you are concerned that FDS& Opt-in obligations management may or are not being met

5

Has all the attributes of point 4 and seems to lack commitment to resolving open issues, in denial - could have Marriage / Partnership issues or you suspect overindulgence in " vices" or if none of these are visible, you have a major lingering concern about this practice (something

isn't right) and require support form your licensee to scrutinise the enterprise, its directors and AR's at a more detailed level

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DETERMINING THE PSA

SCORE

Internal

Using the Risk Assessment score and the Practice Average AQR score, determine the PSA rating using the matrix below.

PSA Score Rating

Pra

ctic

e A

vera

ge A

QR

Sco

re

5 WATCHLIST WATCHLIST WATCHLIST

WATCHLIST

>4.5

4

3

2

1

1 2 3 4 5

Practice Risk Assessment Score

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DETERMINING THE PSA

SCORE

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Step 2

For detailed instructions on how to complete a PSA score within the Adviser Hub –



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DETERMINING THE PSA

SCORE

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PSA SCORE SCENERIOS

1.1 EXAMPLE ONE

• John is a sole practitioner

• His last AAO Rating was 5 – mostly process failures not inappropriate advice

• His previous rating was a 3

• This year he let his support staff member go as the practice has cost issues

• His revenue is good but not at pre GFC levels but he still writes a steady stream of business

• His daughter has a birth defect and requires hospitalisation annually in another state

• John recently admitted to his PM he hasn’t been paying ATO BAS and hasn’t done his tax for 2 years

• John lives up to his name – pre GFC he borrowed heavily to buy property in SE Qld and has had it up

for sale for a couple of years now – he can’t get the price he wants and can’t afford to sell at today's

prices

• John also bought into a number of Agricultural Schemes and is just meeting loan repayments on what

looks like worthless investments – he jokes his Trees look like a Bonsai farm

• John drives a modest old car and operates from very modest premises

• By cutting costs, John is just able to keep his head above water but paid the price in high AA Rating -

false economy

• John has been very open and working hard with his PDM to work his way through his Remediation

and financial issues

Pra

ctic

e A

vera

ge A

QR

Sco

re

5 X

>4.5

4

3

2

1

1 2 3 4 5


John is placed on the Licensee’s Watch List and receives additional Visits /focus from their Supervisor

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DETERMINING THE PSA

SCORE

Internal

1.2 EXAMPLE TWO

• Jim has 5 advisers and plans to open multiple offices

• His advisers last AA Rating average was a 2 and he always asks appeals any rating he disagrees with. He

recently challenged a 3 rating for one of his team and was successful.

• Over the last 18 months he decided on some aggressive expansion plans,

• opening an office in the ACT, buying a book and appointing an adviser,

• buying up a number of Corporate Super books,

• Buying an accounting business,

• He currently has a Mortgage broking business,

• He’s currently looking at GI broker and an acquisition of another licensee’s small

practice that would bring good synergies

• He tries to keep things in his business model simple, one size fits all clients and

generates very good revenue

• He is cashed up (old money) and hasn’t given much thought to the best overarching

business structure to separate his A&D Licensee business from the others – he is

listening to his PDM but is hell bent on focusing on a couple of good acquisitions he

has on the go

• Jim’s due diligence on his acquisitions and his business structure is worrying for the PDM so he’s brought

in Practice Management and Dealer Head to slow the “wild horses” approach Jim has

• In Jim’s defence he has very strong revenue and low debt and does listen albeit slow to action his

licensees advice

• Jim is the kind of man who lives a bit by “just do it and plead ignorance and ask for help later”, an

approach that has been successful for him to date

Pra

ctic

e A

vera

ge A

QR

Sco

re

5

>4.5

4

3

2

X

1

1 2 3 4 5


Jim is placed on the Licensee’s watch list and receives additional visits from his Supervisor and Licensee management

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28

DETERMINING THE PSA

SCORE

Internal

1.2 EXAMPLE THREE

• Jane is a sole practitioner

• Her last AAO Rating was 3 – no significant advice issues. Her previous rating was also 3

• Her business model is quite vanilla. She has good income, generating about $250K per

annum mostly from super and insurance

• Jane is quite low maintenance and rarely complains except for the occasional service

issues she might have

• She seems to have a high support staff turnover, which in the past you have put down to

her fastidious attention to detail, however she recently lost her latest employee, Mary.

Mary seemed to have been one of the better and well organised support people when

compared to others amongst your panel of advisers

• You buy Jane a lunch to discuss business and understand she let Mary go due to a

personality clash. Jane also talks about her new Porsche at a bargain price of $211,000.

During the lunch she also talks about her extensive renovations she is undertaking to her

home, having been inspired by The Block .

• She insists on paying for lunch and puts her $3000 bag on the table to retrieve her wallet

• You know her revenue is only $250K before expenses. She’s divorced and as you know

she is quite an open person when dealing with you, you ask after the well-being of her

family. She doesn't reveal any recent windfall

• While there is nothing untoward, you have concerns that her lifestyle seems inconsistent

with her revenue – in other words it just doesn’t sit right with you!

Pra

ctic

e A

vera

ge A

QR

Sco

re

5

>4.5

4

3 X

2

1

1 2 3 4 5


Jane is on the Licensee’s Watch List, Licensee Management will look at what additional next steps might be taken. This could include a deeper dive by the AAO when her audit comes up, if that is soon, potentially a visit by an RM or Licensee Head. Fraudster’s are rare and it takes skill not to jump to an early conclusion but “doing nothing” is not an option.

ANZ.800.426.0035

29

PUTTING A PRACTICE

ON THE LICENSEE WATCH LIST VIA PSA

Internal

PUTTING A PRACTICE ON THE LICENSEE WATCH LIST VIA PSA

1.1 WHAT IS AN ON WATCH LIST?

The On Watch List is an additional tool that can assist the Licensee in monitoring and supervising

their advisers and practices. This forms part of a broader monitoring and supervision framework,

which includes the Annual Advice Assurance Review, Licensee Standards, the PSA check and

supervisor oversight.

The On Watch List is used to monitor risks that have been identified through different areas of

the business. The On Watch List is not a ‘Red Flag’ item in terms of unacceptable risk to the

licensee. It is, however, a tracking tool in the process of monitoring/supervision and decision

making that must be considered as part of the Licensee’s broader supervision framework.

In and of itself, there is no negative aspect considered for an adviser and/or practice to be

named on the On Watch List, it is an indication the licensee believes it appropriate to take

enhanced supervision activities as part of its AFSL responsibilities.

1.2 POSSIBLE AREAS OF CONCERN

There are many reasons why an adviser or practice will be raised for consideration to the On

Watch List. This list along with other information known about the adviser and practice will be

reviewed when considering raising an adviser for discussion at the Risk Event Forum (REF) to be

added or removed from the On Watch List.

Risk factors can stem from:

• Work Demands

• Loss of Control (e.g. Director or key staff attrition)

• Lack of or major changes to support staff

• Relationships

• Material lifestyle or business change

• Work-Life Balance

• Substance Abuse

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30

PUTTING A PRACTICE


Internal

• Financial Crisis

• Personal and family circumstances

The following is a list of specific possible areas of consideration that may be identified about an

adviser or within a practice to determine if the adviser and /or practices should be raised as a

matter for discussion at the REF and whether it should be added to the On Watch List:

• Starting a new business outside of Licensee

• Starting a new business within Licensee e.g. taking on other corporates

• Personal issues e.g. medical, financial

• Changes of key staff and/or high staff turnover

• Signs of financial stress –Debts and liabilities

• Signs of excessive gambling

• Decline in Advice Assurance Rating – what is the underlying issue

• Two or more audits in a row with an Advice Quality Rating of 4 or 5

• Two or more audits in a row with an Advice Quality Rating of N/A

• Adviser being raised to the Consequence Management Forum (CMF) or submissions to

the Advice Review Team (ART)

• Sudden drop or increase in revenue

• Low income

• Prioritising other business interest above their advice business (Other business could be

mortgage broker, general insurance, accountant)

• Rapid growth of practice

• Lack of engagement, including not responding to emails or phone calls

• More than two at fault complaints regarding the same issue within the same 12 month

period

• A Better Risk Data score of 10 or higher

• Not attending PD Days and/or not meeting CPD points (unless valid extenuating

circumstances)

• Advisers/practice with a major incident

• Continued non adherence to licensee direction and or standards. (Numerous exception

requests on file)

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31

PUTTING A PRACTICE


Internal

Refer – Watch List Procedure

On Watch List Procedures_Final_v1_29062017.pdf

All overall risk ratings between 4-5 need to be included in the Licensee Watch List.

Step 1

For detailed instructions on how to put a practice on watch list as a result a PSA score (4 or 5) within the Adviser Hub –



ANZ.800.426.0038

32

ACTION FOLLOW UP

Internal

ACTION FOLLOW UP

Step 1

For detailed instructions on how to close an open PSA action item within the Adviser Hub –



ANZ.800.426.0039

Contains Confidential Information

WHERE TO GET HELP?

Team

Professional Standards

Incidents

Adviser Development

Adviser Hub Support

Licensee Head Office

Internal

Contact

A d W II M • P f ·onal Standards Confidential

Hayley Carless - Manager Advice Assurance

Confidential

Alison Squire - Manager Advice Assurance

Confidential

Confidential

Joanne Tolentino - Manager Adviser Development Confidential

To be confirmed

Risk and Compliance Managers

Dale Hare (M3) Cheryl McKevett Cheryl McKevett (RI) -

To be confirmed

ANZ.800.426.0040

33

34

VERSION HISTORY

Internal

VERSION HISTORY

Version Version Date Change Description Author(s)

V0.1 15/08/2017 Document created Kathryn Readshaw

V0.2 01/11/2017 Document updated with feedback Kathryn Readshaw

V1.0 30/11/2017 Final document Kathryn Readshaw

ANZ.800.426.0041

35

PROCEDURE

ADMINISTRATION

Internal

PROCEDURE ADMINISTRATION

Document Title: Aligned Licensee- Practice Servicing Assessment

Procedure Guide

Version No. V0.2

Procedure Owner Kathryn Readshaw

Related policies n/a

Supporting guidelines

1. On Watch List procedures v1.0 June 2017

2. Supervisory Framework

3. Adviser Hub procedures

4. Oversight and reporting of PSA results

Date of publication/effective date 30 September 2017

Date of last review 30 September 2017

Next scheduled review 30 September 2018

Regulator (if applicable) N/A

Compliance mechanism N/A

Review and Approval Body N/A

ANZ.800.426.0042

Documents

Aligned Licensee- Practice Servicing Assessment Procedure ... · • Sascha Warner, Senior Manager Operational Excellence • Confidential ESCALATION POINTS ... (PDM) within the first