advice processes and the development of a SoA Flashcards
what 4 obligations make up the best interest duty?
Best interests duty in s961B - known as the safe harbour steps
The appropriate advice requirement in s961G
Give a warning for advice based on incomplete or inaccurate information in s961H
The conflicts priority rule in s961G
list the 6 steps in the clients best interest duty
Step 1: Initial engagement
Step 2: Information gathering
Step 3: Advice formulation and documentation
Step 4: Advice preparation and acceptance
Step 5: Implementation
Step 6: Ongoing reviews
how often must a plan be reviewed ?
at least annually or more frequently
what conflicts of interest must and adviser take into consideration
An adviser should identify any conflicts they may have with the client’s interests e.g. to identify related parties.
Relevant Financial Services Guide and Product Disclosure Statement may assist in identifying conflicts.
Consider who is likely to benefit from providing advice to the client.
Identify how the advice provider or a related party is likely to benefit.
Usually where personal advice is provided to a retail client, a Statement of Advice (SOA) must be provided to the client at…
the same time, or as soon as possible
Possible changes to trigger a review of advice may include:
change or loss of job
change in marital status
birth of a child
an inheritance
death
changes in the financial environment
client recognises that his/her goals have changed
change to government legislation.
what is the difference between maintaining and reviewing a plan?
Maintaining a financial plan allows to provide cost-effective and efficient advice. An adviser may agree to maintain the client’s investments as well, so that the client can seek advice on anything regarding them.
The review process is a separate process that may lead to a new financial plan (SOA). Generally, a review is more expensive than maintaining a financial plan.
Financial advisers must act in the best interests of the client in relation to giving advice.The following points are the major considerations under the Corporations Act (S961B), to satisfy best interest duty.
Identify the objectives, financial situation and needs of the client
Consider clients relevant circumstances. Identify the subject matter of the advice sought
by the client, whether explicitly or implicitly; objectives, financial situation and needs of the client that would reasonably be considered as relevant
Make inquiries to obtain complete and accurate information on the clients circumstances
Assess clients competency
Making reasonable investigation and research of the advised product that a client invest in
Base all judgments on the clients relevant circumstances and
Take any other step(s) at the time the advice is provided that would reasonably be regarded as being in the best interest of the client, given the clients relevant circumstances
list the responsibilities of an adviser to be reflected in a SoA
- Identify, set and prioritise, specific and measurable goals and objectives based on clients circumstances and information.
- Identify client’s relevant circumstances
- Documentation of clients circumstances
- Identify the subject matter and scoping the advice
- Scoping out advice
- Making reasonable inquiries to obtain client information
- Documentation of any unavailable information
- Declining advice
- Product research and considerations
- Providing product recommendation
- Ensuring advice is appropriate for client
- Client education and financial capability
- Advice warning for missing information
- Prioritise client’s interests
- How to put the client’s interests first
- Prepare written recommendations
- Implementation of agreed-upon plan
- Review, revise and maintain the financial plan
A data gathering instrument is important because:
It is the prime means of obtaining information from the client.
