ASSISTING YOUR ADVISERS WITH THE PERFECT FILE Phil Broadbent

2 LEARNING OBJECTIVES This session will demonstrate the key role you play in maintaining robust files through:  Understanding 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.  A recap on the best interests safe harbour provisions.  Understanding how the safe harbour provisions apply to a file in practice.  Providing you with some useful tips on maintaining a robust file maintenance process.  Understanding on how you can assist advisers with accurate implementation of advice.  Understanding your role with maintaining effective processes with regards to FDS & Opt-in.

THE CURRENT STATE 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)  6% of files have not adequately documented the strategy and product advantages and implications (# 3 medium across RI)  5% of files do not support a sound discovery process was undertaken (# 4 medium across RI)

THE PERFECT FILE & BEST INTERESTS 4  The file itself needs to support the best interests requirements have been met.  To do this the file needs to support the safe harbour provisions have been met.  It’s a matter of PROVE IT! “Its not what you know but what you can prove in court that matters” Jamie Foxx from the movie “Law Abiding Citizen”

5 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

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 your 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 and I are meeting because…also present were….  The client told me the following was important to him/her and/or the client and I agreed that the following was important to him/her …..  I identified and recorded the client’s objectives, financial situation and needs stated by the client. - File Notes - PFP High (2) Identify the scope with your client(s)  I identified and 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 and why.  I identified and recorded the scope of advice that is consistent with the advice area sought by the client and the client’s circumstances. - File Notes - PFP - LOE Medium THE PERFECT FILE & BEST INTERESTS

Safe Harbour Step MatterProve It!AAR Scorecard (3) Make reasonable efforts to obtain complete and accurate information  I gathered information from the client which includes details of all existing financial products (relevant to agreed scope) and client’s investment risk profile (if needed). - 3rd Party Authority -PDS -PFP (inc. risk profile q’aire) - 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 and accreditation to advise the client on the advice area and products, and I am authorised by my licensee to do so.  I referred the client to another 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

Safe Harbour Step MatterProve It!AAR Score card (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 and recorded the findings. -File Notes/Working Papers -Research & comparison software (risk researcher/Super Solver) -Like for like comparison on file. -Non-APL approvals -PDS - Advantages and Disadvantages of all strategies considered - Specific reason/s why I picked particular strategy - Advantages and 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/RoA 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 and you need to consider whether it needs to be taken. - File notes Medium Safe Harbour Step MatterProve It!AAR Scorecard AllNOW I ACT IN THE BEST INTEREST OF MY CLIENTS NOW I CAN PROVE IT!High THE PERFECT FILE & BEST INTERESTS

 Use Xplan Threads and Tasks created in Xplan to prompt action. These serve as a reminder and ensure consistency.  Retain all product research in one location (Xplan).  Where Risk Researcher or Super Solver are used through Xplan ensure the output is saved within the relevant client file.  Create and utilise File Note templates in Xplan.  Ensure you are consistently and correctly labeling documents in Xplan.  Use file checklists that make people accountable for the file content. TIPS - FILE MAINTENANCE 10

IMPLEMENTATION  Incorrect implementation is found in 4% of files during reviews. It is also a key area of incidents.  Ensure the applications match what was recommended or what client has altered to.  Review product policy/member statements to confirm implementation is correct. FDS/OPT-IN  Remember these are legal documents and advisers are relying on your support to get these right.  For Xplan related issues in this area contact the Advice Systems team.  For any changes to the FDS/Opt-in process in Xplan contact your PDM. OTHER THEMES 11

 Queries regarding general compliance, policies and professional standards should be referred to the Professional Standards team.  T: or E: Useful Reference Material  Advice Process Standard  Best Interests Standard v1.0  Best Interests Checklist v1.0  Replacement of Product Standard  Xplan Client File Procedure Guide COMPLIANCE QUERIES 12