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Platform prototypes compliance capability

HUB24 is developing a new tech capability, which it says will identify compliance issues before they happen.

The specialist platform is currently working with five licensees to build the tool, including its subsidiary Paragem, which will use machine learning and AI to recognise any irregularities in licensee data.

One such licensee is Fortnum Financial Group, which is currently in the project delivery phase of developing the new compliance tool with HUB24.

Managing director and group chief executive Neil Younger told Financial Standard the tool would allow the licensee to be more proactive in the supervision and monitoring of risk - saving Fortnum Financial time, energy and money.

"Assessing a certain type of risk would normally involve checking a whole host of documents to see if that risk was in fact something you should be worried about," he said.

"What this does is just automate that; it throws up a flag for you - saying that the information is potentially not complete - giving you a reason to go and look a little bit further."

The system is designed as an early warning indicator, he said, so that licensees can intervene if it recognises a problem.

"Mostly there's not, but there'll be an information gap, or the data won't be in the right field, but that way you can fix that input, rather than not knowing you've got a problem," Younger said.

"We spend a lot of time coaching financial advisers as part of our supervision and monitoring function, and this technology will allow us to spend more time on that coaching side, as opposed to manually identifying errors or mistakes."

The system searches for outliers in documents generated by advice practices (for example in SOAs or ROAs), he said, and tests risk-related indicators such as fee disclosure statements and investment strategies.

This includes something as granular as whether a client's money is invested according to their risk profile, or whether a fee structure is appropriate for the size of a client's wealth, Younger explained.

The data is then used to generate data visualisations and reports, enabling licensees to see any discrepancies in real time.

HUB24 chief executive Andrew Alcock said it's just one step towards what he sees as the future of the platform sector.

"We believe that the future of this industry is using data to provide insight," he said.

"We've gone through the Hayne Royal Commission with all these issues in businesses where they didn't have their files; they couldn't find out what had gone on.

"Our view is - if you collect the data and you interpret it properly - you can prevent these issues from occurring in the first place."

The new capability will help take away some of the burden of manual administrative check-ups from licensees so they can focus instead on creating value for advisers and their clients, he said.

"Everyone's more efficient, clients don't have to be remediated and we're able to get on with the job of what we're supposed to do - which is helping clients increase their wealth," Alcock said.

It's what he believes will become a major role for platforms in the coming years; allowing for prevention of issues, rather than detection after the fact.

"The adviser gets to spend more time helping the client, rather than running around and looking backwards to find issues or having auditors do that," Alcock said.

"I think the platforms sector should be working with licensees to try to see how we can use technology to prevent or identify any compliance issues before or as they happen rather than the old-world where these things were detected after the event."

HUB24 will be bringing the new compliance capability to the broader market in the coming months.

Read more: Andrew AlcockNeil YoungerFortnum Financial GroupFinancial StandardHayne Royal CommissionParagem
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