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FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 1 of 45
FNS50615 Diploma of FINANCIAL PLANNING
FNSIAD501 Provide appropriate services, advice and
products to clients
Learner Guide
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 2 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Learner Guide
FNSIAD501 Provide appropriate services, advice and products to
clients
Unit Description
This unit describes the skills and knowledge required to create rapport with clients, identify and analyse their needs, objectives and financial situation, and identify and
present appropriate solutions, including completing and maintaining necessary
documentation and providing after sales service.
Target Group
It applies to individuals working within enterprises and job roles who are required to advise on Australian Securities and Investments Commission (ASIC) Tier I products such
as term deposits and personal, sickness and accident insurance products.
Learning Outcomes
By the end of this unit, students will be able to: → Create rapport with clients
→ Identify client needs, objectives and financial situation
→ Analyse client needs, objectives and financial situation to identify appropriate
solutions
→ Present appropriate solutions to clients
→ Negotiate effectively
→ Complete and maintain necessary documentation
→ Provide after sales service
Purpose of this Learner Guide
This learner guide provides students with guided and referenced study notes to assist student learning
of the competency unit requirements.
When completed, this learner guide, along with tutor provided support material and your own
research will combine to represent a continuous body of evidence of the work you have done and the
skills you have learned. The study notes provided in this learner guide are structured as follows:
• Learning Outcome and Performance Criteria reference
o Study Notes
▪ Worked examples
Students are required to access relevant Competency Unit outlines within their course to understand
the entire unit requirements. Students are required to read all notes and worked examples provided
and supplement these notes with tutor provided support material and own research where required.
It is highly recommended that students self-check their own learning of performance criteria by
completing all learning activities (answering in the spaces provided), checking own answers with the
answers provided at the end of the workbook and asking for assistance as required.
Learner Guide support material
The source references noted in the learner guide provide a good starting point for the student to
undertake their own research by accessing full articles and reports to extend their reading.
NOTE: The learner guide study notes are not provided to be definitive but as a guide. Students are
required to supplement learner guide notes with their own research.
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 3 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Content
1. Create rapport with clients………………………………………………………………………………… 5
1.1 Disclose capacity and capability to clients consistent with code of practice and legislative and
regulatory requirements, and identify and respond appropriately to any client concerns…………….5
1.2 Demonstrate active listening skills in dealings with clients and explain services to them orally or,
if necessary, in writing in a clear and unambiguous way, avoiding jargon and in language appropriate
to the receiver ………………………………………………………………………………………………………………… 8
2. Identify client needs, objectives and financial situation……………………………………………11
2.1 Encourage clients to express and clarify their attitudes, views, feelings and objectives ……….. 11
2.2 Collect relevant personal, financial and business details from clients using appropriate
organisational tool such as a fact finder …………………………………………………………………………….. 11
2.3 Identify clients’ short-term, medium-term and long-term objectives and investment risk profile
using an appropriate fact finder ………………………………………………………………………………………..14
2.4 Identify client preferences and concerns regarding options, using appropriate fact finder where
applicable and priorities identified and agreed on………………………………………………………………..16
2.5 Complete fact finder in accordance with code of practice ………………………………………………..19
3. Analyse client needs, objectives and financial situation to identify appropriate solutions ..20
3.1 Use all information from fact finder process to analyse client needs and determine appropriate
strategy to provide for identified needs and outcomes …………………………………………………………20
3.2 Seek specialist advice if required to address issues that professional judgement indicates may
require further consideration ……………………………………………………………………………………………21
4. Present appropriate solutions to clients ……………………………………………………………….23
4.1 Explain and discuss recommendations and features of client advice record with clients in a clear
and unambiguous way and demonstrate product knowledge appropriate for service or advice
offered ………………………………………………………………………………………………………………………….23
4.2 Disclose impact of key aspects of recommendations in a clear and concise manner, and guide
clients through key aspects of client information brochure prior to signing proposal ………………. 26
4.3 Explain requirements to put recommended program into effect to clients and provide copy of
fact finder to clients if requested……………………………………………………………………………………….27
4.4 Seek confirmation from clients that they understand recommendations presented ………….. 29
5. Negotiate effectively ……………………………………………………………………………………….30
5.1 Explain decisions clearly to clients in accordance with company policy and assist them to make
appropriate decisions regarding solutions to their needs and objectives …………………………………30
5.2 Exercise restraint and composure when dealing with conflict situations involving clients…….. 31
5.3 Follow complaint handling procedures and maintain communication channels when dealing
with complaints ……………………………………………………………………………………………………………..32
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 4 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
6. Complete and maintain necessary documentation………………………………………………….35
6.1 Complete proposal and other documents and, where appropriate, obtain sign off ………………35
6.2 Create or update client records ……………………………………………………………………………………36
6.3 Complete contract variations where applicable……………………………………………………………… 37
6.4 Provide confirmation, including relevant documentation and contract variation, to clients and
implement final plan ……………………………………………………………………………………………………….38
6.5 Organise reference material in a form which facilitates the selection of appropriate products to
meet client needs, and update on a regular basis…………………………………………………………………39
7. Provide after sales service …………………………………………………………………………………40
7.1 Define and communicate after sales service to be provided to clients and execute as needed 40
7.2 Periodically review fact finder, recommendations and client advice records ……………………….41
7.3 Identify and act on any changes to clients’ situation since previous recommendations were made
at subsequent reviews……………………………………………………………………………………………………. 42
7.4 Act on areas of client dissatisfaction in an ethical and timely manner that addresses code of
practice requirements ……………………………………………………………………………………………………. 42
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 5 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
1. Create rapport with clients
1.1 Disclose capacity and capability to clients consistent with code of practice and
legislative and regulatory requirements, and identify and respond appropriately to
any client concerns
Many financial professionals approach the task of giving advice as if it were an objective, rational
exercise, based on their technical knowledge and expertise. But advice giving is almost never an
exclusively logical process. Rather it is almost always an emotional “duet”, played between the advice
giver and the client. If someone is unable to learn to recognise, deal with, and respond to client
emotions, they will never be an effective advisor.
It’s not enough for a professional to be right: An advisor’s job is to help.
Financial planning clients frequently want someone who will take away their worries and absorb all
their hassles. Too often they encounter professionals who add to their worries and create extra
headaches, forcing them to confront things they would rather ignore. Since clients are often anxious
and uncertain, they are above all, looking for someone who will provide reassurance, calm their fears,
and inspire confidence.
There are 3 basic skills that a Trusted Advisor needs:
1. Earning Trust
2. Building Relationships
3. Giving Advice Effectively
The more clients trust their financial adviser, the more they will:
→ Be inclined to accept and act on recommendations
→ Open up about more advanced, complex, strategic issues
→ Share more information
→ Lower the level of stress in client/planner interactions
→ Involve the adviser early on when their issues begin to form, rather than later in the process
Trusted Advisors share the following characteristics from a client perspective:
→ They are consistent, clients can depend on them
→ They don’t try to force things on clients
→ They help clients to think things through (it’s their decision)
→ They challenge client assumptions (helping them to uncover the false assumptions they have
been working under)
→ They make clients feel comfortable (while still taking issues seriously)
→ They act like a real person, not someone in a role
→ They always seem to have the client’s interests at heart
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 6 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Financial Planner Competency Profile
The Financial Planning Standards Board (FPSB) have developed and issued a financial planner
competency profile. This is a comprehensive analysis that identifies the knowledge, skills and
competencies required to competently perform the tasks of a profession, its competency profile, is
the cornerstone of a quality professional credentialing program. There are three key points to be
made by way of background to the FPSB Financial Planner Competency Profile (“the Profile”).
1. the Profile presents the knowledge, skills and competencies expected of anyone practicing
financial planning, regardless of geography or legal jurisdiction. FPSB expects that clients of
financial planning professionals will benefit from a globally accepted set of competency
standards for financial planning professionals.
2. the Profile has been developed to detail the knowledge, skills and competencies, attitudes,
and judgments that a financial planning professional utilises when working with clients in
financial planning engagements. When providing a financial planning service to a client, a
financial planning professional needs to draw on knowledge of financial planning matters, use
appropriate professional skills, and combine these with the ability to carry out the tasks of
financial planning. Indeed, competent performance is defined by the financial planning
professional’s effective deployment, in combination, of the relevant knowledge, skills, and
competencies.
3. the Profile reflects not only what a financial planning professional does today, in a variety of
situations and contexts, but also reflects FPSB’s expectations for the development of the
financial planning profession over the next five years. The Competency Profile describes the
full range of knowledge, skills and competencies needed to competently deliver financial
planning to clients. Financial planning professionals who have chosen to specialise or limit the
scope of their practice (e.g., in one or two Financial Planning areas, such as Estate Planning or
Tax Planning) should nonetheless consider the entire set of financial planner skills and
competencies to identify which are relevant to the client engagement.
Competent performance as a financial planning professional requires a person first to master
theoretical and practical knowledge in a broad range of financial planning and related topics. Once
mastered, the financial planning knowledge can be combined with professional skills and abilities to
competently deliver financial planning.
The professional skills and social competencies described in FPSB’s Financial Planner Competency
Profile are those a financial planning professional must possess, or develop, to deliver advice to clients
in financial planning engagements that involve a high degree of trust, uncertainty, complexity, and
mutual agreement with clients of varying circumstances, or when interacting with colleagues or
others in a professional capacity. While some of these skills and competencies are specific to financial
planning, many are common to all professions.
FPSB has categorised the professional skills and social competencies required of a financial planning
professional into four areas:
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 7 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Source: FPSB Financial Planner Competency Profile
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 8 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
1.2 Demonstrate active listening skills in dealings with clients and explain services to
them orally or, if necessary, in writing in a clear and unambiguous way, avoiding
jargon and in language appropriate to the receiver
Developing a skillset as a financial planner is complex. From learning the financial planning body of
knowledge, to the analytical skills to apply it to specific client situations, to the written and verbal skills
necessary to communicate recommendations to clients, to the interpersonal skills required to
motivate and support clients on implementing those action items, there is a great deal to learn. But,
if there is one skill that seems to have a bigger impact for the success of a financial planner, it’s the
ability to listen. To REALLY listen.
It’s hard to overestimate the value of good listening skills in financial planning. There are several
“levels” of effective listening:
Level 1 – There is no effective listening by the planner. The individual, generally a product salesperson
at this point, is conducting a one-way conversation, just trying to sell the product as a solution,
regardless of the prospective client’s needs.
Level 2 – There is a limited amount of effective listening by the planner, at least enough to hear some
of the needs that a client is articulating. However, the conversation is generally still one-sided towards
the planner, who may simply grasp onto pieces of what has been said, to try to fit it into the planner’s
pre-determined solution, whether it be an annuity, a managed investment portfolio, some income or
estate tax planning strategy, or otherwise. In the end, listening is only done, to the extent necessary
to identify, how parts of what the prospect or client needs matches the already-intended solution.
Level 3 – Some real amount of listening is beginning to occur. The planner starts to look beyond the
comfortable and standard recommendations and solutions, and starts to hear: first, what the client
really says is needed, and only second, begins to formulate what those recommendations might be.
However, the listening is generally still somewhat “superficial”, all that is heard are the exact words
being said.
Level 4 – At this level, real, active listening begins. The planner begins to hear not just what is verbally
said, but perceives some non-verbal communication signals as well, from posture and eye contact, to
gestures. The planner engages in some active listening steps to make the client feel heard, reflecting,
and paraphrasing what’s been said, to clarify understanding and help connect, and showing real
empathy. Solutions grow naturally out of the conversation; the planner is trying to step away from
any existing biases.
Level 5 – The planner is alert and attentive consistently, and pro-actively, applying the principles of
active listening; the process is not merely an intuitive conversation, but represents a trained and
practiced skillset of the planner. The client feels as though he/she is being really heard and
understood, with a genuine empathetic connection to the planner. Communication is not simply
about what is said verbally, or even what the body language suggests, but is a conversation that goes
to the deep issues and feelings. The planner doesn’t even begin to formulate recommendations until
the end of the process, and there are no preconceptions about what might be right; by the time
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 9 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
solutions are discussed with the client, they are such a natural fit to the needs that were discussed,
that they seem to be the only natural course of action.
Some psychologists, who teach active listening skills, suggest that almost no one would consistently
reach beyond what is defined above as “level 3” , unless the planner has actually spent some time
learning the skills and practicing them; this level of active listening simply does not come naturally for
most human beings, especially in a professional business context where planners also feel the pressure
to demonstrate that they are the experts and should be paid for the advice that they offer.
Newer planners often struggle with these skills, not only the verbal (and nonverbal) communication
of the client, but trying to really understand it, reflect it back, and connect with the client. At the same
time, the mind races to just connect the financial planning concepts to the discussion that’s taking
place, while simultaneously trying to capture the information in notes to work on the financial plan,
and ask the probing questions necessary to determine which recommendations and solutions may
ultimately be correct. The pressure is even more severe if it’s a prospective client conversation, and
the planner is also just trying to convince the prospect that it’s worth signing up for a financial plan in
the first place. The common end-result is that eventually the newer planner ends up doing more
talking than listening, especially if he/she is also trying to demonstrate value as an expert in the first
place.
The one skill for financial planners to learn, that would have the biggest positive impact on someone
working with clients, would be learning to engage active listening skills effectively. Planners who can
do that best, can ultimately deliver solutions so “obvious” – because they match the needs and the
situation perfectly – that success with clients easily follows.
TRIUMPHS
To succeed as a financial planner, it’s not good enough to have the right products and the right clients.
Planners need to understand their clients’ underlying goals and constraints, and to develop an
atmosphere of trust and understanding. The “T.R.I.U.M.P.H.S.” model can help to develop those
skills:
T – Treat your clients and prospects with respect. Developing rapport with prospective clients is a
crucial first step. Smile, position yourself at the same level (sitting or standing, depending on what
the client is doing), and slightly lean toward him/her, maintaining eye contact. Make sure your mobile
phone is on silent; give your undivided attention to the client.
Listen to what the client is saying and don’t shuffle papers, or start thinking about a response. Just
listen. Regardless of what the client asks, there is no need to answer immediately. It’s acceptable to
say, “That’s a good question. Give me some time to research our products to find the one that
precisely addresses that question.” Some clients can be long-winded, nervously asking a lot of
questions, especially regarding expensive products, but cutting a client short may lose the rapport
needed to develop the relationship. Always give the speaker the courtesy of finishing a point before
responding. Take notes so you won’t forget what you wanted to say.
R – Reflect what your client is telling you before you respond. The best way to understand a
prospective client is to listen carefully. The best way to do that is to reflect or paraphrase what you
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 10 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
heard the client say, before you comment on it. For example, “If I hear you correctly, you are not
certain that this product will serve your needs.”
I – “I statements” are powerful. As you paraphrase, and reflect what the client is saying, you can use
“I statements,” which are very effective. For example, “I sense you are uncomfortable with this
product and would like some other options.” To start with “You” is more instinctively threatening for
the client.
Imagine hearing, “You don’t like this product?” Realise that, understanding what the listener is saying,
doesn’t necessarily mean you agree. You are simply showing that you are hearing expressed concerns.
U – Understand the needs and goals of the client. If a planner is genuine and recommends quality
products that will truly satisfy a client’s needs and desires, that client ought to trust the planner. That
includes not recommending the most expensive product, if the planner believes it is not right for their
client. Nothing earns trust more than being honest.
M – Monitor the tone and mannerisms of the client. Body language is so important that studies
point out that only a small percentage of what is “heard” by a listener are the words of the speaker.
Most of what we interpret is tone of voice, facial expressions, inflections, hesitations, etc.
Watch for these indications of a client’s mood and attitude. Wait for a moment to interpret what you
sense after a client has finished speaking. You might say: “I get the feeling you believe I’m trying to
persuade you to buy this product. Is that what you feel?”
P – Probe gently and with respect. A planner’s job is to try to understand what their client needs,
and how the planner can accommodate those needs. A good way to show people that you have
exactly the product to satisfy those needs is to ask gentle, but probing, questions about their goals
and hopes, as they relate to the product.
H – Help the client feel safe in the conversation. For major purchases, such as insurance policies and
annuities, clients need to feel safe discussing their specific money issues. Gently probing about
personal and family situations that affect their finances, requires them being able to trust the planner.
This entails ensuring confidentiality and showing genuine concern for their needs. By expecting them
to share their biggest fears and insecurities, a planner must focus in on what they’re saying, be
sensitive, and assure them that the planner will help them to meet their goals.
S – Summarise. Planners can demonstrate their listening skills by frequently summarising what they
just heard from their client. This will also help the planner to focus and remember what the speaker
just told them. If the planner can summarise the key points of their needs, the client will feel validated
and closer. If the planner misses key points that a client is trying to convey, the client can say so.
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 11 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
2. Identify client needs, objectives and financial situation
2.1 Encourage clients to express and clarify their attitudes, views, feelings and
objectives
A new client is coming into a financial planner’s office. They’ve met previously and discussed financial
planning in general terms, but today is their first real appointment. Before the planner can make any
suggestions, however, it will be necessary to uncover not only the minute details of the prospective
client’s current financial situation, but also his or her personal goals and risk tolerance. With so many
questions to ask, where should the planner begin?
The first meeting with the client is extremely important. This is the opportunity for the planner to
demonstrate good interpersonal or ‘soft’ skills. Of paramount importance at this point is that the
planner demonstrate both good communication and listening skills, as well as create an environment
that is respectful to the client, and yet supportive, and gives the client confidence in the planner’s
expertise. Unless an initial rapport and climate of trust can be established, it is highly unlikely that the
client will return. Each financial planner will have developed their own approach to dealing with
clients, but there are some general matters that should be remembered.
Advice should be given that is made specifically for a client. In Australia we have “seller beware”
legislation. A financial planner has to stand 100% behind the advice he or she gives, and it is up to the
financial planner to make sure that the product suits the client for which it is recommended. Extensive
fact-finding needs to be done and a variety of disclosure documents need to be signed by all parties
involved, the sum total of which needs to form a very strong case that, if taken to court, will prove that
an investment was appropriate for the client’s needs.
Unfortuneately, financial planning is often a sales based business. As a consequence, financial
planners must build a very strong case any time they make a recommendation. “Seller beware” means
that the court will side automatically with a disgruntled client, and the only way to avoid legal
problems would be for the financial planner to provide, as evidence, a signed fact-finder sheet that
includes notes about what the client was asking for, and background information on the clients
financial situation. The planner is presumed guilty, if he/she doesn’t have a paper trail that explains
exactly why this product was recommended and not another one, and showing how the product
meets the client’s needs.
Most good financial planners will provide clients with plenty of background information on different
investment alternatives, including all about the risks of a recommended strategy.
2.2 Collect relevant personal, financial and business details from clients using
appropriate organisational tool such as a fact finder
It might be said that the data-collection process explores the art and science of communicating with
a client in order to understand the client’s objectives, risk tolerance and psychological and financial
needs. The data-gathering instrument, often called a fact -finder, is perhaps one of the best sources
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 12 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
of information that the financial planner can use to obtain all necessary information about the
circumstances of a client.
The most important rule for a financial planner is the ‘know your client’ rule. The planner must show
that he or she has a clear understanding of the client’s current circumstances. In order to obtain such
information, a lengthy document is often required. This can be a challenging exercise, for both the
client and planner. In such circumstances, it may be better for the planner to initially work through the
document with the client. Other planners may decide to allow the client to take the fact-finder home,
complete it at leisure, and then return it to the planner.
In questioning the client, it is important to ensure that generic questions are not used; rather, specific
questions addressing the client’s circumstances should be used. It cannot be emphasised enough how
important this information is in relation to constructing the most appropriate financial plan for that
particular client.
It is important for the planner to ask questions. An essential part of the data collection process is to
obtain as much information as possible.
The financial planner’s competencies can be categorised into three financial planning functions:
During Collection, the financial planning professional collects the information required to develop a
financial plan. Collection goes beyond simply gathering information, to also include, identifying
related facts by making required calculations and arranging client information for analysis. During
Collection, the core financial planning competencies are:
1. Collects the quantitative information required to develop a financial plan.
2. Collects the qualitative information required to develop a financial plan.
During Analysis, the financial planning professional identifies and considers issues, performs financial
analysis, and assesses the resulting information to be able to develop strategies for the client. During
Analysis, the core financial planning competencies are:
1. Considers potential opportunities and constraints to develop strategies.
2. Assesses information to develop strategies.
During Synthesis, the financial planning professional synthesizes the information to develop and
evaluate strategies to create a financial plan. During Synthesis, the core financial planning
competency, which draws on the fundamental financial planning practices, is:
1. Develops and evaluates strategies to create a financial plan.
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 13 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Financial
Planning
Area
During the Collection phase the adviser / planner collects the quantitative
and qualitative information required to develop a financial plan:
Financial
Management
→ Collect information regarding the client’s assets and liabilities
→ Collect information regarding the client’s cash flow, income and/or obligations
→ Collect information necessary to prepare a budget
→ Prepare statements of the client’s net worth, cash flow and budget
→ Determine the client’s propensity to save
→ Determine how the client makes spending decisions
→ Determine the client’s attitudes toward debt
Tax Principles
and
Optimisation
→ Collect the information necessary to establish the client’s tax position
→ Identify taxable nature of assets and liabilities
→ Identify the tax structure of client accounts
→ Identify current, deferred and future tax liabilities
→ Identify parties relevant to the client’s tax situation
→ Determine the client’s attitudes toward taxation
Investment
Planning/
Asset
Management
→ Collect information to prepare detailed statement of investment holdings
→ Determine the client’s current asset allocation
→ Identify cash flows available for investment, and expected withdrawals from
the investment portfolio
→ Determine the client’s attitudes/biases towards and experience with
investments
→ Determine the client’s investment objectives
→ Determine the client’s tolerance for investment risk
→ Identify the client’s assumptions and return expectations and mutually agree
on planning assumptions
→ Identify the client’s goal achievement time horizons
Risk
Management
and
Insurance
Planning
→ Collect details of the client’s existing insurance coverage
→ Identify potential financial obligations of the client
→ Determine the client’s risk management objectives and risk exposures
→ Determine the client’s tolerance for risk exposure
→ Determine relevant family and lifestyle issues and attitudes
→ Determine health issues
→ Determine the client’s willingness to take active steps to manage financial risk,
→ including lifestyle and health issues
Retirement
Planning
→ Collect the details of potential sources of retirement income
→ Collect the details of estimated retirement expenses
→ Determine the client’s retirement objectives
→ Determine the client’s attitudes towards retirement
→ Mutually agree on the client’s comfort with retirement planning assumptions
Estate
Planning
and Wealth
Transfer
→ Collect legal agreements and documents impacting estate planning strategies
→ Identify the client’s estate planning objectives
→ Identify family dynamics and business relationships that could impact estate
planning strategies
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 14 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
2.3 Identify clients’ short-term, medium-term and long-term objectives and
investment risk profile using an appropriate fact finder
Most parts of the client questionnaire / fact find document, gives the financial planner an
understanding of the client’s current position. To gain an understanding of where the client wants to
be in the future the needs and objectives section needs to be completed. This should also address
short, medium, and long term goals. They may be defined as:
→ Short term: less than one year
→ Medium term: 12 months to five years
→ Long term: five years and longer
Each client may have a range of aims and objectives, and no two clients will have the same needs.
Establishing clients’ aims and objectives is a vital stage in the 6-step financial planning process.
The art of financial planning is about helping clients to reveal to themselves, and to their advisers,
what they want out of life, and to understand what needs to be done to achieve those aims. Financial
planning is not confined to selecting good investments or other products; and it is not about managing
a client’s portfolio.
Financial planning is the process by which successful financial planners advise their clients, and such
advice demands that sufficient time and patience is allocated to all clients to allow them to explore a
range of possibilities and outcomes. This process of helping clients to define their aims and to
prioritise their objectives is essential.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
It is essential for clients because, it is an opportunity to bring order and purpose to their finances,
expressed through the way they live their lives. A road is mapped out and decisions are made, all
adding to the client’s wellbeing and the sense of purpose of doing what needs to be done.
For the adviser, identifying and focusing on aims and objectives provides efficiency for the financial
plan and motivation for the client. A motivated client who understands what needs to be done, and
when, is far more likely to stick to their budget and long term plan and derive great satisfaction from
doing so.
The modern financial planner must explain that their role is to assist and to advise the client on
financial matters, that the client’s interests are paramount and that the financial planner can only
achieve the best for the client if both client and adviser work together, in harmony. For these reasons,
an adviser must encourage their clients to discuss their feelings and ambitions as fully as possible.
It may be very difficult for some clients to clearly express their aims. Indeed, they may not have even
discussed them with their partner, let alone admitted them to themselves. The client may be
concerned about revealing certain aims to their partner, or remain silent in front of a financial planner,
for fear of being judged for harbouring strange or unusual aims.
Risk Profiling
Investors will be willing to tolerate a higher or lower level of risk, depending on several factors. One
factor is personality. However, other factors modify personality, such as age, as young people tend to
be comfortable with higher levels of risk than older people. Other factors include the investor’s
income, net worth, and financial experience.
Investors who prefer low-risk investments may favour such products as government bonds, which
have a fixed rate of interest. However, even investors with a higher risk tolerance are likely to have
some fixed interest investments as part of a balanced investment portfolio.
Investors also generally like to have some funds that are readily accessible, for unforeseen needs.
These are likely to be kept in separate accounts to other investments.
Most investors will want to own their own home, provided they have the means to do so. Property
offers relatively secure gains at relatively low risk and is especially attractive to people who favour
moderate levels of risk.
Investors with a somewhat higher level of risk will be willing to enter the share market. However,
shares range from low to high risk. Investors with a higher tolerance for risk will be attracted to shares
that have a high risk and correspondingly high prospective returns.
An individual’s risk tolerance, addresses that individual’s risk-taking behaviour. An individual is
exposed to risk in any situation where there is more than one possible outcome. The ISO 22222
Personal Financial Planning Standard defines risk tolerance as “the extent to which a consumer is
willing to risk experiencing a less favourable financial outcome in the pursuit of a more favourable
financial outcome.”
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 16 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
There is a value in knowing a client’s financial risk tolerance, in its own right, that goes beyond just the
legal obligation. The financial planning process almost invariably involves a series of trade-off
decisions which can only be made meaningfully when the elements involved in the trade-off are
known with reliable accuracy. For example, more often than not consumers need to take more risk
than they would prefer, to achieve their initial goals. They simply do not have sufficient present or
prospective savings to fund their lives as they would wish to live them.
Risk tolerance is one of the three key risk-related inputs to a portfolio recommendation – the other
two being the risk an individual needs to take, to achieve their goals (risk required) and the crystallised
risk an individual could accept without changing their life goals (risk capacity).
The adviser’s role in this process is to suggest alternatives, to illustrate outcomes, to recommend but
not to decide. This process is commonly called Gap Analysis and is usually resolved by a combination
of:
→ Increasing the resources being applied through earning more and/or spending less, and
converting personal use assets to investment assets.
→ Easing the goals through delaying, reducing and/or discarding.
→ Taking somewhat more risk than would be their preference (but not to the stage that in a
downturn they might panic and sell).
2.4 Identify client preferences and concerns regarding options, using appropriate fact
finder where applicable and priorities identified and agreed on
It is not for the planner to comment or judge, but instead to help the client to articulate their aims;
and to do their best to understand what it is, that the client would really like to achieve.
By carefully encouraging a client to think about what truly matters to them, one can establish their
key aspirations as well as their daydreams, their ‘nice to have’s’. By exploring the ‘why’ behind the
aims, the financial planner can help the client to prioritise their goals; and at the same time be
confident that the stated aims are really those of the client, as opposed to those that the client thinks
the financial planner wants to hear!
Many clients, without any clear idea of their aims, or how to achieve them, may feel that they are
drifting through life without any real sense of purpose, indeed, that life is passing them by. Not having
identified aims, they are unable to achieve the objectives required to achieve them and are thereby
robbed of the satisfaction of achievement.
This is very powerful stuff: questioning beyond the obvious, delving into deep feelings and
encouraging meaningful dialogue between partners. Encourage the clients to open their minds to
anything, particularly long held secret ambitions; and be ready for anything!
Discussions may move in directions that surprise the planner, the client’s partner, or even the client
themselves.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
A final resolution to these issues may not be reached immediately and it may be weeks or even months
before things can be finalised: this can be a slow and sometimes painful process but the prize of
agreed goals which excite them both sufficiently will ensure enthusiasm from both parties and a far
greater chance of success.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Whose aims and objectives?
The first lifetime cash flow may simply demonstrate the scope in terms of disposable income etc.,
after allowing for essential expenditure, and serve as a glimpse of the future for the client, if they
continue on their existing path.
Some clients are exceptionally clear about their future plans. Many are not. In the absence of a clear
statement from the client of his or her vision of the future, the adviser is left in a quandary. The onus
is placed on the adviser to define the future plans and hopes of the client, in order to move to the next
level of the advisory process.
Without a clear message from the client the adviser might be tempted to substitute vague aims, such
as ‘early retirement’ or ‘financial independence’. The client may agree to these aims, because at the
meeting he/she cannot articulate genuine alternatives. However, this is unhelpful and not the basis
of a successful financial planning process.
It is not the role of the financial planner to impose his/her own ideas or ideals; but rather to help the
client to realisation of their own aims in life. Where a planner’s input may be valuable is in helping the
client to identify the objectives which, if achieved, would move clients towards their overarching aims;
but the aims must be those of the client.
The Institute of Financial Planning is very clear about how a financial planner should determine a
client’s aims and objectives. Under ‘Practice Standard 2.1: Identify the Client’s Personal and Financial
Goals, Needs, and Priorities’ it lays down that: ‘The Financial Planning professional and the client shall
identify the client’s personal and financial objectives, needs and priorities that are relevant to the
scope of the engagement before making and/or implementing any recommendations’.
Validation
It is important not only to ensure that clients are not being unrealistic but also for clients to prioritise
aims and objectives. This can be difficult.
Planners might ask clients to think about various aspects of their lives, how satisfied they are with
each at present, and how they would like to improve things. If they can identify things that they would
like to change, this provides a useful measure of the validity of aims and of objectives. For example,
do the clients believe that achievement of an aim or objective would improve their overall lifestyle and
wellbeing? Is this the case for both parties in a client partnership?
The planner can assist by engaging with the client, by facilitating the ‘life planning’ process and by
providing the client with relevant information. Lifetime cash flow forecasts can be effectively used for
this purpose.
Clients need evidence to demonstrate the future possibilities: lifetime cashflow forecasting can be
used as a tool to help clients to see and test what might be possible, rather than leaving them to rely
completely on their own imagination.
When clients can view their dreams and aspirations in the context of possibility, it becomes much
easier for them to discuss their goals openly between themselves and with their adviser.
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 19 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
2.5 Complete fact finder in accordance with code of practice
Most fact finders used by financial planners will start with an important notice, such as:
‘The Corporations Act and the Australian Securities and Investments Commission (ASIC) give rise to
an adviser having a positive duty to make such enquiries and investigations as are reasonable in all
circumstances before making a recommendation to a client. The information requested in this form
and/or on any subsequent occasions is necessary to facilitate a recommendation being made on a
reasonable basis, and will be used solely for that purpose. _________ complies with its obligations
under the Privacy Act 1988 in handling personal information. This Financial Planning Profile is the
“Fact finder” required by the ASIC code of practice.’
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
3. Analyse client needs, objectives and financial situation to identify
appropriate solutions
3.1 Use all information from fact finder process to analyse client needs and determine
appropriate strategy to provide for identified needs and outcomes
After the fact-finder has been completed, the financial planning professional identifies and considers
issues, performs financial analysis, and assesses the resulting information to be able to develop
strategies for the client. Some of the areas for the development of strategies are:
Financial
Planning
Area
Analyse potential opportunities and constraints and assess information to
develop strategies
Financial
Management
→ Determine whether the client is living within financial means
→ Determine the issues relevant to the client’s assets and liabilities
→ Determine the client’s emergency fund provision
→ Compare potential cash management strategies for the client
→ Assess whether the emergency fund is adequate
→ Assess the impact of potential changes in income and expenses
→ Identify conflicting demands on cash flow
→ Assess financing alternative
Tax Principles
and
Optimisation
→ Review relevant tax documents
→ Analyse existing and potential tax strategies and structures for suitability
→ Assess financial impact of tax planning alternatives
Investment
Planning/
Asset
Management
→ Calculate required real rate of return to reach the client’s objectives
→ Determine the characteristics of investment holdings
→ Determine the implications of acquiring/disposing of assets
→ Analyse potential investment strategies
→ Assess whether investment return expectations are consistent with the risk
capacity and tolerance
→ Assess whether asset holdings are consistent with risk capacity, tolerance and
required rate of return
→ Analyse client’s current holdings
→ Assess potential investment vehicles for use in client portfolios
Risk
Management
and
Insurance
Planning
→ Determine characteristics of existing insurance coverage
→ Examine current and potential risk management strategies
→ Assess exposure to financial risk
→ Assess the client’s risk exposure against current insurance coverage and risk
management strategies
→ Assess the implications of changes to insurance coverage
→ Prioritise the client’s risk management needs
Retirement
Planning
→ Develop financial projections based on current position, including any gap
between income needs and funding
→ Determine if the client’s retirement objectives are realistic
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
→ Examine potential retirement planning strategies
→ Assess financial requirements at retirement to maintain desired lifestyle
→ Assess the impact of changes in assumptions on financial projections
→ Assess trade-offs necessary to meet retirement objectives
Estate
Planning
and Wealth
Transfer
→ Project net worth at death
→ Analyse constraints to meeting the client’s estate planning objectives
→ Compare potential estate planning strategies
→ Calculate potential expenses and taxes owed at death
→ Assess the specific needs of beneficiaries
→ Assess the liquidity of the estate at death
3.2 Seek specialist advice if required to address issues that professional judgement
indicates may require further consideration
Financial planning covers an extremely wide range of financial matters. It is quite common for financial
planners to specialise in a particular area of financial advice, such as:
→ Retirement planning
→ Estate and Intergeneration planning
→ Social security
→ Aged care
→ Taxation
→ Superannuation
→ Insurance
→ Property
→ Etc.
It is also quite common for financial planners to refer to specialist planners, if they have a client
situation that they feel they are not sufficiently capable of dealing with.
Estate Planning Example
A will is a legal document signed by a testator or testatrix, or a will maker, which controls the
disposition of property owned by that person on his or her death. Most people regard the will as being
the dominant estate planning document. This is true for most people. But for some people this is not
the case: if sensible asset protection strategies have been followed then relatively few assets may be
owned personally and the bulk of the assets may be in controlled trusts and super funds.
Only assets owned personally are controlled by a will. Assets owned by super funds and family trusts
are not owned personally, and are not controlled by a will. These should be considered separately in
any estate planning exercise.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
4. Present appropriate solutions to clients
4.1 Explain and discuss recommendations and features of client advice record with
clients in a clear and unambiguous way and demonstrate product knowledge
appropriate for service or advice offered
Normally, giving a client personal advice triggers the need to provide a Statement of Advice (SoA).
The SoA could be the means by which a planner communicates their advice to the client. More often,
however, the SoA confirms advice a planner has already given to the client verbally. This is perfectly
acceptable under the Corporations Act 2001.
The SoA is typically a lengthy document, and despite the use of templates, takes some time to
prepare. On many occasions, the work involved in preparing and sending an SoA does not seem
appropriate. Consider the following example:
The client calls their financial adviser because they are concerned at the downturn in the market. The
financial adviser reassures their client, reminds them that the client’s investments are based on a
recommendation with a long-term investment timeframe, and confirms that there is no need for the
client to change their investments at this stage. The call takes two minutes.
A record of advice (RoA) performs a function like a SoA, but is typically a shorter, more informal
document, with fewer content requirements than a SoA.
It need only be given to the client if the client requests it. In the absence of such a request, the RoA
may simply be kept among the financial adviser’s records. For this reason, a RoA can be as simple as
a file note. The Corporations Act 2001 and associated regulations set out various occasions on which
a RoA may be used in place of a SoA.
There are four occasions on which a RoA can be used. For this reason, it is easier to think about there
being four different kinds of RoA.
1. Further advice RoA
The most well-known kind of RoA is the when providing “further advice”. The provisions which give
rise to this kind of RoA are found in regulation 7.7.10AE of the Corporations Regulations 2001. This
regulation allows an adviser to prepare a RoA instead of providing the client with a SoA, where:
→ The adviser has previously given a client a SoA, setting out their relevant personal
circumstances in relation to the advice set out in that SoA;
→ The client’s relevant personal circumstances in relation to the further advice (determined
having regard to the client’s objectives, financial situation and needs as currently known to the
adviser) are not significantly different from the client’s relevant personal circumstances in
relation to the previous advice;
→ As far as the basis, on which the advice is given, relates to other matters – the basis on which
the further advice is given is not significantly different from the basis on which the previous
advice was given.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Factors to consider when deciding whether this kind of RoA can be used are:
→ Changes to the client’s risk tolerance;
→ Changes to the client’s family situation;
→ Significant changes to the client’s income;
→ Significant client illness or incapacity;
→ Changes occurring to a product;
→ Tax considerations;
→ Risk (attached to the product);
→ Economic environment;
→ Regulatory environment;
→ Significant local or world events.
To be satisfied that the client’s circumstances are not significantly different from when the SoA was
given, an adviser needs to determine if there has been a significant change to the client’s
circumstances since the SoA was provided.
2. Deposit products and certain other products RoA
If a planner provides personal advice on any of the following financial products, they don’t have to
provide a SoA and can instead rely on a RoA:
→ A basic deposit product;
→ A non-cash payment facility for making non-cash payments that is related to a basic deposit
product;
→ Travellers’ cheques;
→ Cash management trust interest;
→ Motor vehicle, home building, home contents, travel, personal and domestic property, and
medical indemnity insurance products.
3. Hold RoA
Another kind of RoA is one which may be used where the adviser recommends that the client take no
action in relation to their portfolio – sometimes known as a “hold” recommendation.
There is no need for the adviser or licensee to have previously provided a SoA to the client. The
provisions relating to this kind of SoA are found in section 946B(7) of the Corporations Act 2001. These
provisions state that a RoA may be used where:
The advice does not recommend or state an opinion in respect of:
→ The acquisition or disposal of any specific financial product or the products of a specific issuer; nor
→ A modification to an investment strategy or a contribution level in relation to a financial product
held by the client; and
→ The following people do not directly receive any remuneration (other than remuneration that is
currently being received for an earlier acquisition of a product) or other benefit for, or in relation
to, the advice:
o The adviser;
o The corporate authorised representative (if applicable);
o The licensee;
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
o An employee or director of the licensee;
o An associate of any of these.
4. Small investment financial advice RoA (RoSIA)
The fourth kind of RoA is available for advice relating to small investment amounts. The difficulty with
this kind of RoA is that the provisions relating to its use are complex.
There are different rules for different product types, and these vary, particularly when it comes to
working out what is and is not included in the threshold for each product type. For this reason, many
advisers find the complexity in working out if this kind of RoA can be used on any one occasion
outweighs the benefit.
Unlike other RoAs which only need to be provided if clients ask for them, RoSIAs need to be given to
the client as soon as practicable after the financial advice is given and, in any case, before any other
financial service, which relates to the advice, is provided.
There are no fixed rules as to what a RoA should look like.
Many SoAs look like one another. This stems partly from the numerous prescribed content
requirements pertaining to them – for example, the need to have the title “Statement of Advice” on
the cover or near the front of the SoA. It also stems from the fact that the SoA is a document prepared
primarily to be read by the client.
RoAs generally (except for RoSIAs) only need be given to the client, if they request a copy of them and
have few content requirements. For those reasons, they need to be reasonably neat and accessible. A
client may ask for a copy of the RoA at any time up to seven years after the provision of the advice to
which it relates. Advisers must comply with any such request.
Many RoAs are never requested by clients. Accordingly, they can be prepared in a way which fits with
the adviser’s usual recording keeping practices for telephone conversations and file notes. Some
advisers develop a one-page file note template, which doubles as a RoA.
A further option is to keep RoAs electronically. It is fine to do this and have no hard copy RoAs. This
way, a RoA template can integrate with the software used to record client details and create SoAs. A
software system might even assist financial advisers in working out whether a RoA may be used by,
for example, providing a link to the previous SoA.
Another option is to email the client to confirm advice provided, and make the email the RoA.
Although advisers are not obliged to provide most RoAs to a client, unless they ask for them, there is
nothing stop advisers from providing them proactively.
The requirements for what must be included are set out in regulation 7.7.10AE of the Corporations
Regulations 2001 and section 946B(9) of the Corporations Act 2001.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
4.2 Disclose impact of key aspects of recommendations in a clear and concise manner,
and guide clients through key aspects of client information brochure prior to signing
proposal
Part D of ASIC’s RG 175 requires that SoAs be “clear, concise and effective”. The Financial
Ombudsman Service (FOS) observes that the phrase “clear, concise and effective” is not defined in
the Corporations Act. It therefore recommends that these words be given their ‘natural’ meanings.
(‘Natural’ is a legal term that means ‘what people usually think this word means’). FOS then quotes
the Macquarie Concise Dictionary as follows:
1. “clear” means “plain”, and “free from obscurity … confusion, uncertainty or doubt”;
2. “concise” means “brief and comprehensive, succinct, terse;
3. “effective” means “producing the intended or expected result”.
FOS expects SoAs to be expressed in plain English, to be brief yet comprehensive and to promote
understanding. In many ways, the three criteria collapse into the last one (that the advice be,
effective). If writing is not clear and concise it will, almost by definition, be ineffective.
Effective means achieving the intended result. The intended result of the advice is to meet disclosure
obligations. That is, to ensure that the client has been told everything that they need to be told, in
order to understand what it is that the planner is suggesting they do with their money. This implies
that the disclosure should be made in a way that clients, and a ‘reasonable person’, can comprehend.
Financial Services Guide
The purpose of a Financial Services Guide (“FSG”) is to help clients make an informed decision about
the services offered by a financial adviser. The FSG is an important document that explains how the
adviser will provide financial services to the client. Clients should read this FSG carefully before using
any adviser services. It is intended to give the client sufficient information to decide whether to obtain
financial services from the adviser.
In a FSG, a client will usually find information about:
→ who the advisers are;
→ what financial services they provide and the products to which those services relate;
→ what their responsibilities are and what type of advice they provide;
→ how the client can instruct them;
→ what the client can expect to pay for the financial services;
→ what remuneration and other benefits may be paid to the advisers, their employees, or others;
→ what to do if a client has a complaint, and how it will be dealt with;
→ for what purpose advisers use client contact data; and
→ how the client can contact the adviser
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 27 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Now review the financial services guide “FSG – Knight Financial”, located in the
Additional Resources folder.
4.3 Explain requirements to put recommended program into effect to
clients and provide copy of fact finder to clients if requested
From an adviser’s point of view a statement of advice or “SoA” is a written explanation of the adviser’s
advice to a client. It explains and records the advice, the reasons for the advice and how the advice is
to be implemented. It also provides various statutory disclosures designed to protect the client and to
make sure the advice is reasonable and suited to the client’s circumstances.
ASIC, in RG 175, emphasises the client’s point of view and the importance of the SoA as a
communication tool. RG 146 states that: “A SoA is a document that helps a retail client understand,
and decide whether to rely on, personal advice.”
A SoA normally comes at stage three of the classical five stage financial planning process, and
comprises an integral part of the process. The five stages comprise:
1. the collection of client data;
2. the determination of the client’s objectives and the identification of financial issues;
3. the preparation of the client’s SoA;
4. the implementation of the SoAs recommendations; and
5. an on-going review of the plan for the client.
What should a good SoA look like?
Advisers have different opinions as to what a good SoA should look like. One common approach uses
the following headings:
→ Your goals and objectives
→ Your personal and financial circumstances
→ Your attitude to risk
→ Scope of our advice
→ Our advice
→ Why our advice is appropriate
→ Any disadvantages connected to our advice
→ The financial consequences of switching products
→ Whether we have any conflicts of interest
→ What you should do next
→ Remuneration disclosure
→ A generic description of alternative strategies and classes of financial products and products
considered
→ Any consequences and benefits lost on a product switch
→ Appendices
Within this framework, a SoA should have an individual flavour and should reflect the adviser’s
personal preferences and practice style. The SoA must comply with certain Corporations Act
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 28 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
requirements and should comply with certain industry accepted conventions, but its primary role is to
explain the advice to a client. If it does this, it is an effective SoA.
Corporations Act compliance is important, and necessary, but all the compliance in the world will not
make a bad SoA into a good SoA. It’s a mistake to over-emphasise compliance issues, to the point
that the SoA looks like it has been prepared by an over-anxious solicitor, paralysed by the risk of
litigation, rather than a skilled and experienced financial planner, with sound technical skills, confident
of their advice, and its appropriateness to his/her client’s circumstances.
The SoA should be first, and foremost, an effective client communication.
An effective SoA helps present a professional image and minimises the risk of a complaint due to client
misunderstandings, or a failure to disclose information required under the Corporations Act.
There is a trend to shorter and more concise SoAs. Generally, this is a good trend. More is not
necessarily better, and may often be worse, with the advisers’ message and meaning lost in a group
of disclaimers, unnecessary explanations, and irrelevant appendices. Effective conciseness enhances
the SoA as a communication tool, and improves the impression the SOA makes on the clients
perception of the adviser and their advice.
The SoA should be tuned to the clients’ financial sophistication, literacy, and level of wealth. What is
appropriate for one client, may not be relevant to another. An expansive explanation, backed by
detailed research may be appropriate for a recently retired engineer, who is obsessed with investment
detail, and who loves researching how to invest his $3,000,000 self-managed super fund. But it will be
lost on a time-poor, young mother of three, who only wants advice on her industry super fund life
insurance options.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
The adviser’s writing style should be concise and precise, and their English plain. The SoA should be
presented well and easy to read.
4.4 Seek confirmation from clients that they understand recommendations
presented
It is important that financial advisers
seek acknowledgement from their
clients regarding several matters
relating to fact finding and statements
of advice.
There are many forms that the acknowledgement can take, but usually it will require
acknowledgement of:
→ The completeness and accuracy of information provided by the client
→ Confirmation of receipt and explanation of the adviser’s FSG
→ The terms of engagement, including fees
→ The adviser’s collection and use of client personal information
→ Receipt of information relating to complaint lodgement
→ The adviser’s use of client tax file number information
Now review the booklet: “Client Acknowledgement”, located in the Additional
Resources folder.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
5. Negotiate effectively
5.1 Explain decisions clearly to clients in accordance with company policy and assist
them to make appropriate decisions regarding solutions to their needs and objectives
When a client needs guidance, working with an objective advisor can help in key areas of their financial
life. An objective financial planner is one who has minimal conflicts of interest, and always has the
client’s best interests in mind.
An objective adviser doesn’t normally receive commissions for selling clients investments or
insurance. Instead, clients pay only for the advice. This is called “fee-only” or “fee for service” advice.
Since the planner doesn’t benefit financially, if the client takes the advice or not, beyond the fee paid,
clients can feel confident the recommendations are objective. This may not always be the case when
an adviser is selling products, and receiving commissions.
Many experts recommend working with a certified financial planner who is fee-only, and operates as
a fiduciary, a professional who always puts the client’s interests first. Such a planner can help with a
wide range of financial decisions, such as:
Defensive financial planning
Defensive planning helps make sure clients are protected against the unfortunate things that can
happen in life. Looking at their financial picture and how best to protect their family’s financial future,
defensive planning covers:
→ Current financial status: Is the client overspending and not saving enough for future goals? Are
there areas where clients can redirect resources to better fund their more important goals.
→ Risk mitigation: Risk mitigation is an elaborate term for insurance planning. Do clients have the
correct types of insurance in place? Are premiums reasonable for the benefits provided? An adviser
can help determine whether clients and their assets are protected against unexpected events that
can arise. For instance, how would a family be affected, if someone became disabled or died?
→ Estate planning: This involves creating a plan and the necessary documentation to minimise
problems for a family if someone dies or becomes disabled. With proper estate planning, clients
will be able to determine the best ways to minimise the tax consequences of passing on assets to
heirs.
Offensive financial planning
Offensive planning elements are those that can increase the chances of financial success and enhance
the quality of life in the future. They include:
→ Education planning: How much will children’s education cost? How much needs to be saved to
fund those future costs?
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
→ Retirement planning: This is a major element of a financial plan. An adviser will help clients to take
steps today, to make sure they have adequate income and assets, to live the life that they want
during their retirement.
→ Investing: Investing plays an important role in helping clients to achieve many of their financial
goals. Key investing questions an adviser can address, include:
o Do clients have the right level of risk in their portfolio?
o Are clients getting the maximum return for the level of risk that is right for them?
o What are the costs of any investments?
o Is the portfolio adequately diversified?
o Is the portfolio tax-efficient?
→ Tax planning: While clients may also work with a tax professional, their adviser will cover issues
like strategies to minimise an overall tax bill. Tax planning involves looking at the tax efficiency of
each part of a financial plan, including investments and retirement, education, and estate plans.
5.2 Exercise restraint and composure when dealing with conflict situations involving
clients
Most Australian financial planners / advisers are subject to a conflicts of interest management policy.
The policy is often set out in two parts:
→ Part 1: Conflicts of Interest Management Policy (the Policy); and
→ Part 2: Conflicts of Interest Management Procedures and Guidelines (the Procedures).
The Policy sets out the approach and rules in relation to the identification and management of
conflicts of interest; the Procedures set out the processes which have been implemented and the
guidelines to follow to adhere to the Policy requirements.
The Policy sets out the expectations of the type of conduct and behaviour that is acceptable when
conflicts or potential conflicts are present. The Procedures should be read in conjunction with the
Policy.
Policy statement
The requirement to properly identify and manage conflicts stems from a combination of statutory and
common law requirements, prudential standards, regulatory guides, industry best practice and
industry codes of conduct. Financial planners should aim to deliver a high level of quality service to
their clients and should rigorously support ethical behaviour. As a condition of employment, many
employee planners are expected to conduct their activities and responsibilities with integrity and fair
dealing.
Conflicts can potentially interfere with the integrity of decision making. If conflicts taint decisions or
services, this could damage the planners’ reputation with clients, investors, superannuation members,
stakeholders, regulators, and the broader community, by diminishing their confidence in the planners
ability to treat them fairly and honestly. For these reasons, most planners are committed to ensuring
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
that all personnel comply with the policy, and that actual or potential conflicts of interest, and/or duty,
are identified, recorded, assessed, managed and monitored in accordance with the policy and the
procedures.
Planners should be required to identify and manage conflicts of interest and conflicts of duties in
accordance with the policy. This includes:
→ Reporting potential and actual conflicts in the manner described in the procedures.
→ Not putting themselves in a position where their personal interests would result in a breach of
this policy or the industry code of conduct.
→ Working to develop treatment plans for any identified conflicts.
→ Providing periodic updates on adherence to any treatment plans for managing identified
conflicts.
When a conflict cannot reasonably be managed, it must be avoided.
Now review the ASIC guide: “Managing conflicts of interest in the financial services
industry”, located in the Additional Resources folder.
5.3 Follow complaint handling procedures and maintain communication channels
when dealing with complaints
Complaints are an important way for financial planners to be accountable to their clients, as well as
providing valuable prompts to review their personal performance.
A complaint is an “expression of dissatisfaction made to or about an organisation, related to its
products, services, staff or the handling of a complaint, where a response or resolution is explicitly or
implicitly expected or legally required”.
An effective complaint handling system provides three key benefits to a financial planning practice:
1. It resolves issues raised by a client who is dissatisfied in a timely and cost-effective way;
2. It provides information that can lead to improvements in service delivery; and
3. Where complaints are handled properly, a good system can improve the reputation of a
practice and strengthen client confidence in the practice’s administrative processes.
Clients want:
The planning practice needs:
→ a user-friendly complaint handling system
→ to be heard and understood
→ to be respected
→ an explanation
→ an apology
→ action as soon as possible
→ a use- friendly system for accepting feedback
→ clear delegations & procedures for staff to deal
with complaints and provide remedies
→ a recording system to capture complaint data
→ to use complaint data to identify problems and
trends
→ to improve service delivery in identified areas
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Effective Complaints Handling Systems
Complaints should be handled objectively and fairly, with appropriate confidentiality, remedies are
provided where complaints are upheld, and there is a system for review for finalised complaints.
An effective complaint handling system should be a ‘fit for purpose’ system. This is a system that is
varied to fit a practice’s circumstances, and is proportionate to the number and type of complaints it
receives. Decisions about building a ‘fit for purpose’ system could incorporate the following
considerations:
→ The number and demographics of the practice’s clients, and how they generally communicate
with the practice;
→ The nature and breadth of the practices’ interactions with the public;
→ The level of complaints that is considered reasonable for the practice (by examining trends in
its level of complaints over time and industry benchmarks);
→ The practice’s risk management strategy – complaints are an important way of monitoring and
mitigating any risks;
→ The value the practice derives, or wishes to derive, from complaints to improve its operations
over time, as well as other information needs, of management; and
→ The cost of operating a complaint handling system
Complaint handling is an important role in a practice and should be recognised as such. Complaint
Handling Officers are the most important factor in ensuring that a practices’ complaint handling is
responsive to complainants. Complaint Handling Officers should be empowered to make decisions,
or have access to someone who can make decisions.
Enabling
Complaints
•Arrangements
for enabling
clients to make
complaints are
customer
focused, visible,
accessible and
valued and
supported by
management.
Responding to
Complaints
•Complaints are
responded to
promptly and
handled
objectively,
fairly and
confidentially.
Remedies are
provided where
complaints are
upheld, and
there is a
system for
review
Accountability
and Learning
•There are clear
accountabilities
for complaint
handling and
complaints are
used to
stimulate
practice
improvements
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
An effective resolution at the earliest opportunity will enhance the complainant’s view of the practice
and allow prompt improvement to practices. Complaints should be handled by people who have the
appropriate skills and authority to resolve or investigate complaints and, where appropriate,
provide remedies and identify improved practices.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
6. Complete and maintain necessary documentation
6.1 Complete proposal and other documents and, where appropriate, obtain sign off
The Authority to proceed is an important document for both the planner and the client. It usually
forms part of the SoA and the formal confirmation that the client understands and accepts the
planner’s recommendation(s).
Without this signed document, the planner has:
→ no authority from the client to proceed with the recommendation(s), and
→ no defence, in the event of a complaint.
If any investments are being placed in the name of a client’s partner, that partner will also need to sign
the Authority to proceed – i.e. the Authority to proceed is required to be signed by ALL clients, and by
the planner.
If the client decides to accept the planner’s recommendations, they need to complete the “Authority
to Proceed” form, and date and sign it. Their signature acts as confirmation that:
→ their personal financial details and other relevant information are correct
→ they understand and consent to the provisions of the Privacy Statement, and
→ they understand that they are acting, either to proceed as recommended, or to proceed with
differences from the advice recommended (i.e. it is quite common for clients to vary the
advice, i.e. reduce the amount of insurances etc.). If this occurs, this needs to be documented
in writing and signed where required.
→ If the client decides to proceed with differences to the planners’ recommendations, or not
accept part of, or all, of the planners’ recommendations then, this needs to be clearly
documented.
Capacity
Planners should ensure that the client(s) sign the “Authority to Proceed” and any application forms in
the right capacity:
Client
Who needs to sign the “Authority to
Proceed”
Individual
Individual
Joint
Both clients
Partnership
At least one partner, preferably the managing partner
Company
2 directors, or sole director, or director and secretary
Trust of SMSF
All trustees
Client operating through a power of
attorney
Attorney, or all attorneys, if jointly appointed
Deceased estate
Executor of the estate
In all instances, the original Authority to proceed should be kept on file with a copy given to the client.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
6.2 Create or update client records
Financial advisers must keep records that demonstrate that they have complied with all the relevant
regulatory requirements.
The financial services licensee must ensure that records of the following matters are kept in relation
to the provision of the personal advice:
→ to prove that the best interests duty has been satisfied—the information relied on and the
action taken by the provider that satisfies the steps in that subsection;
→ the advice given, including the reasons why it would be reasonable to conclude that the advice
is appropriate to the client, had the provider satisfied the best interests duty;
→ where the provider knows, or reasonably ought to know, that there is a conflict between the
interests of the client and the interests of an adviser, the information relied on and the action
taken by the provider to indicate that the provider has given priority to the client’s interests,
when giving the advice.
The financial services licensee must keep the records required for 7 years after the day the personal
advice was provided to the client. ASIC have not given specific guidance as to the records that must
be kept. Given that, everything that might be needed to demonstrate that the client’s best interests
have been served, should be kept on file. ‘If in doubt, keep it on file’ is the basic proposition when it
comes to client records.
One of the simplest ways to ensure that
all relevant records are kept is to use
checklists. A checklist allows the user to
systematically ensure that they have
kept a record of everything that needs to
be contained within a client file.
The best way to ensure adequate record
keeping is to save a blank copy of the
client file checklist within each client file,
when that file is first created. Whenever
the file is added to, it is then simply a
matter of checking the checklist to see if
it too needs updating.
For example, when a client first makes
contact and the practice sends that
client a copy of the FSG, the email
containing the FSG should be saved
within the client file. At the same time,
the checklist is updated to show that this
has been done, as in the example
provided.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
File Notes
File notes are essential in a client file. The taking of detailed file notes is number 1 on the Financial
Ombudsman Services’ list of top ten tips for financial advisers. The very best form of client note is a
contemporaneous one (FOS describe these as “solid gold”). A contemporaneous file note is one that
can be proven to have been made at the time that it relates to, rather than a note that was prepared
sometime later (perhaps after the need for a record was revealed).
A detailed contemporaneous file note should be made of all verbal discussions with clients.
Contemporaneous file notes can be one of the most important documents in the event of a dispute
with a client. A typical client complaint will involve some element of dispute in relation to the verbal
discussions between the adviser and the client. A file note may be the only record made of a
conversation, and will assist with proving what happened.
One of the easiest ways to create a contemporaneous file note is via email. The email is, of course,
time stamped and thus the date is automatically recorded. Usually, the recipient of the email is a
client, but it might also be another person such as an insurer. Sending the email to someone else not
only proves that the note was contemporary, it also demonstrates that the contents of the note were
agreed to by the other person. This is unless, of course, the other person does not agree. In that case,
however, the client’s written response containing the disagreement also becomes a file note, and in
this way the file note can be used to clearly demonstrate what the shared understanding at the time
was.
6.3 Complete contract variations where applicable
As client needs and personal situation may change over time, planners need to advise their clients of
an ongoing need to review the client’s situation. This review is to intended keep the advice aligned to
the client’s personal situation. This may be in respect to strategy, and to products.
The planners’ business model will dictate how they review, and when they review. In some situations,
for example, where a client is paying for a fee-only service, the planner must make it clear that the
responsibility for requesting a review rests with the client.
If a planner engages a client where they pay ongoing fees for the expectation of timed reviews, then
the planner must fulfil their obligation as they may have entered a contract to provide services, and
are being paid by the client to render such services. In the event the planner does not provide such
services, then the client is entitled to seek compensation.
Clients may be advised about varying statement of advice by the inclusion of the following in the
original SoA:
“The advice in this statement of advice is appropriate to your circumstances and in your best interests
as at the time it was prepared. However, economic, and legislative environments constantly change
and personal circumstances constantly change. This means our advice must be reviewed and changed
on an on-going basis to ensure it remains appropriate and in your best interests.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected].au
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
You are responsible for ensuring our advice remains appropriate to you and in your best interests.
You undertake to request in writing an up-dated statement of advice from us at least every six months
or whenever your personal circumstances, including your attitude to risk, change. You agree that we
are not responsible for any losses incurred by you as a consequence of any act or omission by us after
6 months from the date of our most recent statement of advice.
You agree to notify us in writing immediately should your personal circumstances change. You agree
that we are not responsible for any losses incurred by you should you fail to notify us of any change in
your personal circumstances or should you cease to engage us as your adviser.”
If clients have complied with these requirements, contractual variations to the SoA should be straight
forward. However, if the client did not comply with these requirements, the contact variations might
be more complex.
6.4 Provide confirmation, including relevant documentation and contract variation,
to clients and implement final plan
To this point the financial planning data has been gathered and analysed, financial planning
statements have been created, goals and objectives have been measured and financial gaps found.
The next step in the financial planning process is implementing the financial plan’s recommendations.
Though this is not the last step in the process, most of the hard work has been done. However, the
best financial plan is worthless, if it is not implemented.
To help with the implementation of a financial plan, many planners will create an “Action Plan”. A
financial planning action plan should include all the tasks that the client will be need to accomplish to
improve their financial situation.
Recommended Action – The action plan is a list of the recommendations that the client should
accomplish to strengthen their financial plan. There are two ways of viewing this list. Depending on
the situation they can be listed by importance, or chronologically (desired date of accomplishment).
Purpose of Accomplishing Goal – Next, the financial planning action plan should include a description
of what each recommended action accomplishes. This helps communicate the importance of
accomplishing the recommendations and provides an audit trail of sorts. This will come in handy if the
client changes financial planners, or wants to refresh their financial plan.
Target Date – All good goals and objectives are time driven. This means choosing a reasonable
amount of time in which to implement the recommendations. This is often the easiest way to keep
everyone on track.
The Corporations Act does not require a SoA to include an “authority to proceed” form, authorising
the adviser to implement the recommendations on behalf of the client. However, it is an industry
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convention and good practice to include such a document, at least as a sample, as an appendix to the
SoA.
6.5 Organise reference material in a form which facilitates the selection of appropriate
products to meet client needs, and update on a regular basis
SoA content
ASIC has released extensive regulatory guidelines providing financial planners with further guidance
on SoA content and what it regards as good practice.
Regulatory Guides 168 and 175 are expansive and will re-pay close reading. Some observations
include:
→ incorporation by reference – A SoA may in effect indirectly include another document if there
is a clear reference to it and the other document is available from the adviser at no charge. This
‘incorporation by reference’ rule allows internet hypertext links and similar devices to
efficiently improve the information content and format of a SoA;
→ extraneous (non-mandatory) material – Such material, e.g. research reports, should be clearly
labelled and distinguished from the mandatory material;
→ clear, concise, and effective – be as brief as possible without compromising accuracy;
→ highlight important information – particularly where the SoA is long, say more than ten pages;
→ the longer the SoA – the greater the need for navigational aids such as a table of contents,
executive summaries and so on (bearing in mind the general move away from lengthy SoAs);
→ no ‘compendious’ documents – SoAs cannot be combined with other documents such as
financial services guides and product disclosure statements (section 947E);
→ dates and time limits – SoAs should be dated and any time limit on the applicability of the
advice stated;
→ presentation is important – ASIC believes presentation is as important as content as far as
client comprehension is concerned; and
→ avoid generic formats – SoAs should be tailored to the client and should not include generic
research or irrelevant information.
Educational and research materials
It is good practice to provide educational and research materials to clients, or at least those clients
who have expressed an interest in receiving such materials. These materials should be clearly marked
as additional materials, and included by way of appendix or hypertext link. They should not form part
of the core materials.
The provision of generic educational and research materials does not replace the need for competent
and complete advice and full disclosure of all relevant matters under the Corporations Act.
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Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
7. Provide after sales service
7.1 Define and communicate after sales service to be provided to clients and execute
as needed
Financial advisers and financial planners follow a sales process whenever they attend to their client’s
financial needs. When following the sales process, financial planners must perform their role
professionally and ethically and in accordance with the industry’s code of practice. The industry code
of practice:
→ Describes standards of good practice and service;
→ Promotes disclosure of information relevant and useful to clients;
→ Promotes informed and effective relationships between financial organisations and clients.
The sales process that financial planners use, when dealing with clients, is based on the following
model:
→ Exploring the client’s needs
→ Establishing the current financial position of the client
→ Providing advice and recommending suitable products and services
→ Obtaining agreement and completing an application
→ Provide ongoing sales service
In many product and services situations, -sales support given to the client is key to the
effective use of the product or service. These can take many different forms and be passive or active.
They can range from online self-help to intensive client training.
The financial planner, should see after sales support, as a means of assisting the client to gain the most
benefits from the original purchase. That is, to enable the planner to assist the client to make the best
use of the product or service, solve their needs or problems efficiently, and enhance the client
experience in some manner.
Some financial products may not be that simple or obvious to understand and clients may need
support to take advantage of the various features of the product. Most planners provide product
disclosure statements, Q&A webpages, online videos, case studies and scenarios to assist clients to
learn how to understand their products, or to apply them to specific circumstances. In most cases,
these support facilities are provided free of charge, but those which provide training or support
beyond the basic usage of the product, are normally fee based.
Providing a range of support options is key to ensuring client satisfaction, even if fee based. If clients
fail to understand the product sufficiently to solve the problem for which they made the original
purchase, they are going to have an unsatisfactory experience. If the aim is to sell additional products
to the same client, encourage them to repeat buy, or to recommend the planner to others, ensuring
they gain maximum benefits from their products, is critical.
After sales support is an important conduit for client relationship building. A client who is engaged
through the after sales process is connected to the planner and periodically reinforces the original
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ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
purchase decision. When the client has a positive support experience, they reconfirm their original
decision. This positive experience will positively influence their decision to return, or to recommend.
Once the client has used various forms of client support and understands how to most efficiently use
them, they have built up knowledge of how to optimise their relationship with the planner. If this
works for them, they will be reluctant to move to a new planner and should go through that learning
experience again. This switching cost effect can be very beneficial to the planner.
Clients who are engaged in after sales support activities and have a positive experience are more likely
to be receptive to cross-selling or promotional offers, and are more likely to recommend the planner
to others.
7.2 Periodically review fact finder, recommendations and client advice records
Few things in life are ever constant. The ebb and flow of events and experiences will constantly
change, as will client aims and objectives. What is valued and pursued in youth, is very different to
what has priority in later years. Financial planning therefore must constantly adapt and adjust to key
life changes.
While no two people will ever have the same life experience, there are key markers and events in life
that are generally common to everyone. Relationships, employment, purchases, and pastimes are
unique to each person, but all have a common thread. These events can have a profound effect on a
person’s priorities and on their financial situation. Often financial success depends greatly on whether
people choose to plan proactively around these life events, or simply allow them to happen and ‘take
their chances’.
There are a few reasons why ongoing reviews of fact finder information are important:
→ Live events may mean that a client’s aims and goals have shifted
→ Changes across markets, products and regulations can mean that some strategies are no
longer as effective. This means changes may need to be made to help the client achieve their
goals
→ Reviews give an adviser a chance to update their files and provide additional more relevant
advice
→ they cement the client / planner relationship, so that the client will be more likely to approach
the adviser if they need additional advice. They will also be more likely to refer others to the
financial adviser.
It is challenging for clients to try and manage all the financial decisions they need to make throughout
their life. That is where a financial adviser can be so important to the process. They can offer objective
and informed guidance through all stages to ensure a client’s financial strategy is well matched to the
client’s current life goals and robust enough to withstand the impact of life events.
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 42 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
7.3 Identify and act on any changes to clients’ situation since previous
recommendations were made at subsequent reviews
An ongoing relationship with a financial planner substantially reduces client costs of accessing, and
maintaining, investment and financial products.
The Ongoing Services listed below form part of a planners’ value proposition to their clients:
→ Regular monitoring of client portfolios, and making adjustments, where prudent, with clients
written permission.
→ Utilising professional investment research to make investment decisions regarding those
managed funds
→ Conducting a progress assessment (also known as a review) on at least an annual basis, either
via telephone or face to face
→ Being available to discuss changes of circumstances in between annual, half-yearly or quarterly
progress assessments.
→ Ongoing access to the financial planning team
→ Up to four formal review meetings per year, depending on service level agreed to.
→ Up to four reviews of a client’s financial plan per year, incorporating a review of the strategies
and investments that make up the plan
→ A written report from the annual reviews
→ Project management of actions resulting from the plan and reviews.
Financial planners keep up to date on rules, regulations, investments, superannuation, insurances
etc.so clients don’t have to.
7.4 Act on areas of client dissatisfaction in an ethical and timely manner that
addresses code of practice requirements
Every day, thousands of Australian consumers voice their dissatisfaction about the services they
receive, or fail to receive, from the professionals they deal with, across a broad range of industries.
The financial services industry is certainly not immune from such discontent. Statistics published by
the Financial Ombudsman Services Limited (FOS), indicate that it receives over 1,200 investment
related disputes each financial year.
While advisers and Australian Financial Services (AFS) licensees alike can take a variety of steps to
minimise the likelihood of receiving complaints, there is no guaranteed way of financial planners being
insulated from a client complaint. What they do have control over, however, is the way they deal with
the complaints they receive. This may, in some cases, have a significant impact on how a complaint
turns out and by implication the effect it has on a planners’ business.
The importance of good procedures
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 43 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
AFS licensees are required by law and the Australian Securities and Investments Commission (ASIC),
to have in place a dispute resolution system that consists of:
a) Internal dispute resolution (IDR) procedures that meet the standards or requirements made or
approved by ASIC; and
b) Membership of one or more ASIC-approved external dispute resolution (EDR) schemes.
While ASIC provides detailed guidance on what it expects AFS licensees to consider, when putting
together their IDR procedures, it nevertheless leaves the detail of those procedures to the discretion
of individual AFS licensees. In fact, ASIC expects AFS licensees to personalise their IDR procedures by
considering (amongst other things), the size of their business, the nature of their client base, the range
of financial products or credit activities they offer and the likely number and complexity of disputes
they may receive.
This gives AFS licensees a great amount of flexibility to tailor their IDR procedures to reflect the
circumstances and needs of their individual businesses, thus allowing them greater control over how
they manage the complaints they receive (within the parameters set by ASIC’s guidance).
It is against this background that AFS licensees should examine the appropriateness of their IDR
processes, against their business and its needs. For example, how quickly does the process allow
someone to start investigating a complaint after it is initially received? Are there any ‘roadblocks’ in
the current IDR process that cause delays in commencing investigations (e.g. is a complaint letter
spending too much time languishing in someone’s inbox, rather than being acknowledged
immediately and dealt with in an effective manner)?
Another important consideration for AFS licensees in this respect is also how well its internal
stakeholders, especially its authorised representatives, understand and follow its IDR procedures.
There is little benefit in having a robust process, if no one understands or follows it. At the end of the
day, it is still the obligation of an AFS licensee to deal with a complaint, even if the complaint is lodged
with its authorised representative(s). Accordingly, AFS licensees need to not only ensure that they
have robust processes in place, but that their staff, and authorised representatives, understand and
follow those processes.
Dealing with client complaints
It is imperative that AFS licensees acquaint themselves with the conditions of their Professional
Indemnity insurance policies (PI) to the extent they relate to informing the PI insurer about a client
complaint. Potentially voiding one’s PI policy due to failing to notify an insurer of a possible claim
within the insurer’s requisite period would be a disastrous outcome for any AFS licensee.
As a rule, it is best to remove emotion from any complaint related issue. Dealing with disputes requires
a level of objectivity that is difficult to achieve, if irrational emotional responses come into play. To
the extent possible, it is usually a good idea to have an ‘independent’ party within the AFS licensee
(i.e. someone besides the subject of a complaint) to deal with, and respond to, the complaint. Where
this is not possible, e.g. in smaller dealer groups, at the very least it may be worth getting a ‘fresh set
of eyes’ to look through the complaint, and the proposed response, for example, a trusted peer, a
professional services consultant, etc.
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 44 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Most complaints are triggered by an emotional response to an event that a client has experienced. For
example, a client discovers that their recommended portfolio has lost a substantial amount of value.
So, any perceived failure to deal with the complaint, within a reasonable amount of time, or in a less
than professional manner, is only likely to aggravate an already volatile situation even further.
FNS50615_FNSIAD501 Learner Guide V1.0_01_2019 Page 45 of 45
Sydney Institute of Interpreting and Translating
Tel: 61 2 9283 5759 Fax: 61 2 9264 2380 E-mail: [email protected]
Postal Address: PO Box K1, Haymarket NSW 1240
ABN: 30 128 128 503 RTO No: 91490 CRICOS Provider No: 03069K
Significant benefits
Effectively engaging with the affected client(s) throughout an IDR process can yield significant
benefits, including making it easier to obtain crucial further details from the client(s), and in some
cases, assisting in managing a client’s expectations regarding the outcome of the complaint.
Consider all options, and the best possible commercial outcomes that may be available in the
circumstances. Remember, EDR schemes charge fees to deal with disputes, and Court cases can be
very expensive, in terms of both time and resources, to defend. In this context, it can be worth
thinking about whether it may be beneficial to finalise the complaint, before it progresses any further.
In the event a complaint progresses to the EDR scheme, an effective strategy is generally to
proactively engage with the EDR scheme’s processes (including providing detailed submissions,
coupled with documentary evidence addressing the subject matter of the complaint). EDR schemes
generally also do not prohibit parties from trying to settle disputes on their own terms (where
possible).
Remember also that, for an AFS licensee, serious misconduct and possible systemic issues are
reportable breaches to ASIC. These are matters an AFS licensee dealing with a client complaint should
also have regard to.
The new reality
It is a fact that the financial services industry is operating in times when a client compliant is not so
much a possibility, but rather a likelihood. A complaint can arise regardless of whether a planner has
provided good advice, or followed proper procedures. There are also services available to disgruntled
clients to assist them in making and managing their complaint. It is an increasingly tougher world out
there for planners and AFS licensees. Nevertheless, the right preparation and approach remain the
best tools available for a financial planning business to be able to meet this challenge, as and when
the need arises.

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