KPMG flags licensee supervision risks

KPMG flags licensee supervision risks

ASIC’s finding that many licensee audits are inadequate means licensees need to find better ways to monitor and supervise their authorised representatives, says KPMG.


In March, ASIC announced it uncovered instances at the major financial institutions where auditors were failing to identify non-compliance and allowing rogue advisers to go undetected.

“It’s clear from this report that ASIC remains committed to improving the standard of financial advice within the industry, with a key focus on the execution of effective adviser audits,” KPMG said in a recent ‘Insights’ article.

“However, conducting thorough and comprehensive financial adviser reviews can be complex and time consuming exercises for licensees, often testing the limits of existing resources and capabilities.”

KPMG said it believes licensees should be asking themselves a number of questions, including whether internal staff have sufficient experience and expertise to properly identify issues.

A positive trend, however, also noted in the report was the increasing use of data analytics in the development of Key Risk Indicators.

“The most common KRIs used as part of the institutions’ monitoring and supervision processes included: adviser audit ratings informing the level of risk, and accordingly, the frequency of audits; and the occurrence of potentially systematic issues identified by the adviser audit process,” KPMG said.

“Although still an emerging capability, ASIC believes that the use of data analytics to develop KRIs is a useful and efficient method to improve the identification of high-risk advisers and non-compliant advice.”

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