Client interests first: the adviser’s mantra

Two months into 2018 and already ASIC has penalised three Australian financial advisers, for amongst other ‘sins’, not putting their clients’ interests first.

Think it wouldn’t happen here? Think again would be Strategi’s advice. History suggests that where ASIC goes, the FMA will likely follow. The three cases are briefly outlined below.

Enforceable undertaking places Queensland financial adviser under supervision for 12 months

Briefly, the adviser failed to meet his obligations in providing life insurance replacement advice, including failing to:

  • undertake adequate inquiries into the relevant personal circumstances of some clients to whom he made recommendations to switch life insurance policies
  • provide adequate replacement product advice in the Statement of Advice, preventing the client from making an informed decision to switch life insurance and superannuation products
  • advise on purchasing life insurance that the client could afford
  • consider the longer term impact on retirement savings of placing life insurances within superannuation, and
  • provide accurate information about the clients' circumstances within the Statement of Advice.

ASIC bans former Commonwealth Financial Planning adviser for 5 years

In this case, ASIC found that the adviser:

  • engaged in conduct that was likely to mislead by cutting clients' signatures from documents held on file and pasting them onto new documents;
  • did not act in the best interests of her clients when advising they roll-over their existing super to a new product
  • did not act in the best interests of her clients by advising them to cancel existing insurance policies and apply for personal insurance issued by CommInsure; and
  • failed to prioritise the interests of her clients when advising them to acquire financial products which entitled her, her employer and its related entities to a financial benefit.

Breakaway Finance Group offers enforceable undertaking to cancel AFS licence

ASIC had concerns regarding both the conduct of Breakaway as an AFS licensee and of one of its advisers, in particular, that the adviser:

  • failed to make reasonable inquiries into the clients' relevant circumstances prior to providing advice
  • recommended insurance cover where clients were unable to afford the premiums
  • failed to provide adequate product replacement disclosure when recommending clients to switch products.

The number one message from these cases is that a client’s interests must come first.

Demonstrating you put your client’s interest first – the importance of your documents and records

Strategi suggests there is a second message: make sure your records prove you put the client’s interests first. Can you demonstrate that for any client:

  • You know your client and that your knowledge of their personal circumstance is up to date – you have verified the information they provided you with, no longer than 12 months ago?
  • You have reviewed their existing insurances against their current circumstances and ensured they have the correct types of cover and it is still appropriate, no longer than 12 months ago?
  • When you reviewed their insurances for suitability, you kept notes on any research you undertook (such as Quotemonster product comparisons) to make sure the actual product was still the best in the market for them?
  • In any situation where you recommended a change to an insurance product/product provider, you have sufficient records that you can justify your recommendation to change five years after the recommendation was made?
  • The client received all the information they needed in order to make an informed decision –from your disclosure statement, product statements and product research, to quote comparisons and sign-off documents?

Remember documents do not have to be paper-based – they can be created, sent to the client, returned by the client, and stored electronically. But they must be kept.

Contact us for a range of technology solutions to help streamline you advice processes and keep all the documents and records you need to prove you put your clients’ interests first always.