WHAT DOES THE PERFECT FILE LOOK LIKE Phil Broadbent

2 LEARNING OBJECTIVES This session will help you to: Understand the current “state of play” with issues we are seeing with files in the field. Understanding the relationship between maintaining robust files and meeting best interests. Provide a refresh of the safe harbour provisions in the context of file maintenance. To review a case study and demonstrate the key elements required in a file.

THE PERFECT FILE & BEST INTERESTS 3  5% of files are not supporting best interests was met (#1 high across RI).  9% of files have insufficient file notes to support the advice provided (#1 medium across RI).  7% of files have insufficient product research (#2 medium across RI).  The file itself needs to support the best interests safe harbour provisions have been met.  It’s a matter of PROVING IT! “Its not what you know but what you can prove in court that matters” Jamie Foxx from the movie “Law Abiding Citizen”

4 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Identify your client objectives Identify the scope with your client(s) Make reasonable efforts to obtain complete and accurate information Assess whether you have the expertise required to provide the advice Base your advice on the client’s circumstances Take any other step Demonstrate that you have investigated existing products BEST INTERESTS RECAP

QUESTION – Client Objectives 5  What should you capture in documenting a client’s objectives (select the most correct answer)? a)Use industry terminology such as active management and super- link. b)Describe the strategy or product to achieve the needs of the client. c)Describe what the client wants to achieve, have a timeframe and be prioritised. d)Be broad such as “Review my Super” to ensure the advice is not scaled inappropriately.

Safe Harbour Step MatterProve It! AAR Scorecard (1) Identify your client objectives  Objectives should resonate with the client, be in their language.  Describe what the client wants to achieve, not the strategy/product to achieve it.  Look beyond the obvious, i.e. implicit as well as explicit.  Have a timeframe & prioritised (high/medium/low, out of scope).  The client & I are meeting because…also present were….  The client told me the following was important to him/her &/or the client & I agreed that the following was important to him/her …..  I identified & recorded the client’s objectives, financial situation & needs stated by the client. - File Notes - PFP High THE PERFECT FILE & BEST INTERESTS

Safe Harbour Step MatterProve It! AAR Scorecard (2) Identify the scope with your client(s)  I identified & recorded the advice area sought by the client, either stated or implied.  If the advice area has been limited by the client or by me, I recorded by whom & why. - File Notes - PFP - LOE Medium THE PERFECT FILE & BEST INTERESTS

Safe Harbour Step MatterProve It!AAR Scorecard (3) Make reasonable efforts to obtain complete & accurate information  I gathered information from the client which includes details of all existing financial products (relevant to agreed scope) & client’s investment risk profile (if needed).  Document all attempts to obtain information including any warning to the client around the risks of not providing information. - 3rd Party Authority -PDS -PFP (inc. RPQ)) - Policy documents - Member statements - File note contact with existing product providers - Working papers Medium (4) Assess whether you have the expertise required to provide the advice  I have the expertise & accreditation to advise the client on the advice area /products.  I am authorised by my licensee to do so.  I referred the client to an adviser who had the expertise to provide the advice.  I declined to provide advice as I did not have the expertise to provide it. - Accreditation register - File Notes - FSG High THE PERFECT FILE & BEST INTERESTS

QUESTION – Reasonable Product Investigation 9  In performing your reasonable product investigation you must consider the following to meet the situation of the client (select the most correct answer)? a)Existing products held by your client (relevant to the advice sought) b)Products your client requests that you consider c)Only products on your Approved Product List d)Products on your Approved Product List e)a, b & d Reminder: It is imperative that all research is retained on file. Retaining proof that you had a strong basis for your recommendation is important in the event of a complaint.

Safe Harbour Step MatterProve It!AAR Scorecard (5) Demonstrate that you have investigated existing products I did the following research for the client to determine:  What I felt the client should consider.  Given what the client had told me in 1 (their objectives) what strategy I believed was best for the client.  How the client’s existing products fitted in (or did not fit in) to achieve that strategy.  The most appropriate approved products to achieve that strategy.  I investigated any financial product that the client requested that I consider & recorded the findings. -File Notes/Working Papers -Research (risk researcher/Super Solver) -Like for like comparison on file. -Non-APL approvals -PDS - Advantages & Disadvantages of all strategies considered - Specific reason/s why I picked particular strategy - Advantages & Disadvantages of all products considered -Specific reason/s why I picked particular product Medium to High THE PERFECT FILE & BEST INTERESTS

Safe Harbour StepMatterProve It!AAR Scorecard (6) Base your advice on the client’s circumstances  I have documented all this in an advice document including correct fee/commission disclosure. If applicable the products recommended match the client’s risk profile or include appropriate explanation -File notes -SoA/Ro A Medium to High (7) Take any other step  There is no absolute requirement to take an extra step. Whether it is required will vary on the circumstances & you need to consider whether it needs to be taken. File notes Medium THE PERFECT FILE & BEST INTERESTS Safe Harbour Step MatterProve It!AAR Scorecard AllNOW I ACT IN THE BEST INTEREST OF MY CLIENTS NOW I CAN PROVE IT!High

1.Read the condensed client file – Rebecca Smith 2.Appoint a table scribe & spokesperson 3.Complete the questions 4.Group Discussion 12 CLIENT FILE CASE STUDY

CLIENT FILE CASE STUDY QUESTIONS 1.Has the adviser identified the clients objectives? Could the objectives be identified differently? How? 2.Is the scope adequate? Could it be improved? If so, how? 3.Has a reasonable investigation been made into products that may be appropriate to satisfy the recommended strategy? 4.Does the advice meet the client's objectives? 5.Does the file support best interests provision have been met? If not, why not? 13

MOVING TO THE PERFECT FILE 14

MOVING TO THE PERFECT FILE 15

MOVING TO THE PERFECT FILE 16 This file required more information to support the advice provided: 1.Clear identification of the client objectives with timeframe and priority. 2.A defined agreed scope of advice (including what is outside the agreed scope). 3.A discussion on premium structure and what may be suitable to the client: Stepped/Level premiums - TPD definition - Affordability- Insurance ownership - Benefit & Waiting period 4.More detail in the file notes to capture key discussions, thoughts and feelings of the client that will impact the approach taken with the advice.