‘Clients’ or ‘Customers’?
Financial advisers will be transitioning into the FMCA regime as part of the Financial Services Legislation Amendment Bill.
During the transition, it is likely financial advisers and their head groups / aggregators / employers will be reviewing internal and external documentation. When undertaking this work and when starting to talk to advisers about the changes, Strategi recommends checking that the terminology used in reference to your clients is, if necessary, changed from customers to clients.1
Why this change?
- The FMCA specifically refers to clients. It does not use the word ‘customer’.
- MBIE refers to clients in its consultation paper relating to the new financial advice regime.
- The Code of Professional Conduct for AFAs refers to clients. It has a definition of a client but not one for customers.
- The FMA appears to use the term ‘customer’ and ‘client’ interchangeably.
It is common to use the terms customer and client interchangeably. However, the majority of dictionaries and writing guides tend to differentiate between the two. The consensus is:
A customer is someone who buys goods or services from a store or business while a client is someone who receives professional services.
The following table helps explain the difference between the two.
|Basis for Comparison||Customer||Client|
|Meaning||Customer means a person who buys goods and services from the company.||A person who looks for professional service from the business is known as a client.|
|Engages in||Transaction with the company.||Fiduciary relationship with the company.|
|What company offers||Products and services||Services|
|Company focuses on||Selling||Serving|
|Personal attention||Less required||Highly required|
Read more here.
As we progress towards the new financial adviser regime, Strategi Group will use the word ‘client’ rather than ‘customer’. This reflects the belief that financial advisers are in business to place client interests first and provide a professional service, rather than merely sell a product.
1: This does NOT apply in relation to AML/CFT requirements where the use of ‘customer’ in relation to customer due diligence remains correct and should NOT be changed.