Ch 7: Providing Advice in Derivatives Flashcards
Establishing relationship with client (stage 10
- confirm type of advice you are authorised to offer and to what type of client
- AFS licence - Provide financial services guide (for retail client)
- Provide general advice warning (for retail client)
financial services guide
- supplies basic information about an organisation to help retail clients decide whether to obtain financial services from it.
- contains complaint handling; fees & charges, who you are licensed through, financial services offered, associations or interests that might influence advice
General advice warning
- advice has been prepared without taking into account client’s objectives, financial situation or needs
- client should consider appropriateness
- if advice relates to acquisition of particular financial product; client should obtain PDS
Oral warning: simply state it is general advice and may not be appropriate to the individual
Identifying client’s objectives, needs & financial situation (stage 2)
- KYC
- Know your product
- ensure advice is appropriate
Analyse client’s objectives, needs, financial situation and risk profile (stage 3)
- analyse info gained to date
- establish client’s risk profile
- seek specialist advice
- may need to seek specialist advice
Developing appropriate strategies and solutions (stage 4)
- assess alternatives
- research
- drafting a plan, policy or transaction
Present appropriate strategies and solutions to client (stage 5)
- explain proposals
- present recommendations - the statement of advice
- content and presentation
Statement of Advice, exclusions
- intended to help client make an informed decision about whether to follow the advice provided.
- must be provided where advice is new or materially different to previous advice provided
Exclusions
SOA not required where
- advice is market related related to the product
- does not include buy or sell recommendations and the advisor receives no remunderation for the advice
Further SOA not required where:
- client has received SOA in last 12 months
- adviser has checked clients details and these haven’t changed
- advice relates to acquisition or disposal of asset
Record of Advice
ROA can be used instead of SOA where advice relates to small investments <15,000 (which are not derivatives, specified insurance products or in some cases superannuation and RSA products
Product Disclosure Statement
Must contain:
- fees
- risks
- benefits
- significant characteristics
- dispute resolution arrangements
- cooling off periods
Short form may be given, this summarises certain information from the full PDS
PDS must be prepared when:
- recommendation situation (where you give personal advice recommending the acquisition of a particular financial product
- issue (issue or offer a financial product)
- sale (sell a financial product)
Negotiating a financial plan, policy or transaction with client (stage 6)
- discuss any concerns
- confirm preferred plan, policy or transaction
Coordinating the implementation of the agreed plan, policy or transaction (Stage 7)
- explain time frame for execution
- explain fees and cost structures
- safeguard client’s money and assets
Safeguarding client assets / money
- money can be withdrawn:
- if a client makes written direction in relation to the monies
- for defraying brokerage and other charges
- when paying the licensee money to which it is entitled
- margin calls, dealings in ETD
- interest may be retained by licensee if licensee discloses to client their intension
Completing and maintaining necessary documentation
- sign & exchange formal agreement
- maintain documentation
- ## provide confirmations
