Compliance Matters May 2013 Webinar – Bon Avis

In the next 90 mins… How can you deliver advice? What options do you have? Why is this important? Is the four page SOA a Unicorn?

Disclaimer This presentation is general in nature and should not be seen as personalised advice. It is designed to provide information to those practicing in the financial advice industry. It should not be relied upon as advice for your own practice. The management of IDS accept no liability for any loss or damage caused by this presentation, but will accept kindly any recognition for positive outcomes if you do act on the information.

Why is this important?

Because this is the advice!

Regulatory Requirements

Code Standard 6 “An AFA must behave professionally in all dealings with a client, and communicate clearly, concisely, and effectively.” This includes; Communicating “effectively”. Requires an AFA to take reasonable steps to ensure the client understands the communication.

Code Standard 7 An Authorised Financial Adviser must ensure each retail client has sufficient information to enable the client to make an informed decision; whether to use the Authorised Financial Adviser’s financial adviser services and/or to follow any financial advice provided by the Authorised Financial Adviser.

Code Standard 12 An Authorised Financial Adviser must record in writing adequate information about any personalised services provided to a retail client.

What should be written?

AFA Monitoring Feedback From the horses mouth..

Written records of advice Make sure your 'Statement of Advice' clearly shows your client what's been recommended - and why. Use language your client will understand to explain what has been recommended Make sure you understand what you're recommending Describe both the benefits and risks

Don't bury fund fees and fund details in technical appendices - costs are important to your client and to your advice Make it clear who the client is when giving advice to a trust Make sure that if you limit your advice you clarify exactly what you will do and won't do.

FMA Guidance – Care, Skill & Diligence Product replacement advice Are you giving an opinion on the disposal of an existing product, as well as the purchase of a new product? Do you compare the client's existing arrangements with the new recommended product. (This will require knowledge of the terms of the client's existing product.) Clear, reasonable and balanced. Material differences relevant to the client, including any loss of benefits and adverse consequences. if no comparison is made, inform the client of the limited scope of the service.

Advice It is difficult to see how an adviser can call him/herself an “adviser” if they are not providing full advice on both the benefits and disadvantages between the client’s existing arrangements and the replacement cover. If no comparison give the client the time to conduct their own assessment of benefit differences.

Who is interested in the SOA?

Statement of Advice Clients You Your Business Product Providers Regulator

What are their expectations?

For Clients? Do I understand? Did they meet my expectations? Can I trust them? What will this cost me? Did I get what I wanted?

For You? Easy to prepare and use? Fit for the purpose? LRAC! Client takes advice.

For Adviser Business? How long does it take? How much does it cost? LRAC! Brand and standards? Does it get results?

For the product provider? Selling our products Not misrepresenting us Meeting brand guidelines Meeting regulatory requirements

For the Regulator? Meeting ALL regulatory requirements FAA FSPR Disclosure Complaints Code of Conduct Not misleading or deceptive Diligence knowledge and skill

Poll Do you provide a written statement or record of advice?

ADVICE PROCESS REVIEWS

Statement of Advice? 48% 21% 5% 26%

Are recommendations in the Statements of Advice written in a way that is clear, concise and effective (easy to understand) and suitable to the client? Ref: C Std 6, BP

Clear and Concise? 29% 19% 45% 7%

Does the Statement of Advice clearly and simply state why and how the product(s), product features and type and / or strategy is / are appropriate /suitable for the clients’ needs and circumstances? Ref: C Std 9

Why the product fits the need? 17% 43% 24% 17%

Answer the question in your SOA.. Why does this… Provider/Product/Service/Benefit/Fund/Option Meet your needs and circumstances… And why is it a better option than what you have?

How do you provide written advice?

Poll How do you deliver advice? Report containing all information Letter containing advice only Emails

You can determine how.

There is no one way. Written Report/Plan Email Report/Plan Letter or Record of Advice Emails

Statement or Record of Advice?

Statement of Advice before decision or Record of Advice after decision

BUT DON’T CALL IT SOA OR ROA!!!

Does the four page SOA exist?

Bazzas solution for the four page SOA Agree Engagement and Facts (TOE/SOS/FF) Agree advice required and or needs identified (Email) Give advice (In four pages or less) Agree actions (Implementation Schedule)

Business Benefits You get agreement at each step before proceeding. If a client understands why they will buy. Help inform them to make better decisions Reduce the risk of the product not meeting their needs or doing its job.

Best Practice Keep generic stuff separate from the advice. The advice should be personal.

ACTION POINTS Review current process and delivery. Get someone else to read your reports!! Ask clients for feedback on documentation.

Questions

Hopefully we have got you thinking.. Written Advice is VERY important. Does your current process stack up? What will you change?

FIN