Transcript Slide 0

RI Advice – Compliance opportunities
April 2013
Top 10 Tips for Advisors
1. Take detailed file notes
2. Use a client’s own words
3. Turn clients away when appropriate
Source: FOS Circular Issue 10– Winter 2012
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Top 10 Tips for Advisors
4. Explain the risks to clients who choose to act against your advice
5. Explain what types of service you are providing
6. Use template forms and documents carefully
Source: FOS Circular Issue 10– Winter 2012
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Top 10 Tips for Advisors
7. Use risk profiling tools carefully
8. Don’t give cookie cutter advice
9. Understand and explain the products
10. Be clear about the advice relationship with clients you know
Source: FOS Circular Issue 10– Winter 2012
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RI Advice – You give great advice, can you prove it?
April 2013
Session objectives
• At the end of this session, you will be able to
 Understand the requirements for a client file
 Apply your knowledge to identify missing and/or incorrect elements in a client
file
 Understand and identify the best interest/reasonable basis requirements to
be evidenced on a client file
 Know who to contact for more information
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File Elements
• FSG
• Client Identification
• Data Collection
• SoA/RoA
• Implementation
• General File Requirements
Where file elements are required to meet best interest/ reasonable basis
obligations a best interest checkpoint will highlight the evidence required
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Financial Services Guide (FSG)
• A FSG must be given to a client before or as soon as practicable after providing the
financial service
• What are the file requirements for provision of an FSG?
 The client file must provide evidence that the client received an FSG at the appropriate
time and which FSG was provided i.e.. Version
• What does this evidence look like?
 FSG Receipt and/or Diary Note
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Anti-Money laundering/Counter Terrorism financing (AML/CTF)
• All clients must be identified and validated in accordance with the AML/CTF
legislation prior to arranging the service.
 Special consideration should be given to enhanced due diligence requirements for
higher risk clients
• What are the file requirements for identification and verification of clients?
 Client identification form
 Appropriate identification (e.g.. Drivers Licence)
 Diary Notes outlining procedures taken in conducting the identification process
• Refer to AML/CTF Procedures for details on what needs to be completed and
documented.
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Discovery /Data Collection – Fact Find
• What needs to be included in the Fact Find document?
 Current Situation
 Needs & Objectives
o Document the reason why the advice is being sought by the client, what the
client is seeking to achieve
 Client needs and objectives are the foundations for best interest
 Includes both implicit and explicit needs
 Objectives, financial situation and needs of the client that would
reasonably be considered relevant to the advice sought on that subject
matter must be identified (client’s relevant circumstances)
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Discovery/Data Collection – Fact Find cont.
• Product Information
 Investigation into ‘from’ funds and policies is required
• What are the file requirements for the fact find?
 No blank sections
 Evidence that Fact Find content is acknowledged
o Adviser & Client signatures
o Date on the document
 Evidence of research into existing funds and policies
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Statement of Advice (SoA) Record of Advice (ROA)
• What is the requirement?
 All personal advice has been provided in writing in an advice document (e.g.
SOA/ROA)
• What needs to be on the file?
 Advice Document on approved SoA/RoA template
 Dated
 Signed
• Consistency across the file is the key
• Don't complete an SOA if there isn’t sufficient information
• Don't make assumptions, seek clarification if it's relevant to the advice
Statement of Advice (SoA) Record of Advice (ROA)
• What needs to be included in the advice document?
 Relevant, accurate information that is consistent across the file
• Current Situation
 Balance sheet
 Income and Expenses
 Needs and Objectives
• Scope of Advice
 Appropriately defined
• Disclosures
 Accurate and complete
 Consistent with commentary, the FSG and other service agreements (e.g. Ongoing
Service)
 General disclosures as per Licensee template
Statement of Advice (SoA) Record of Advice (ROA)
• Strategy & Recommendations
 Strategy must clearly meet the client’s needs and objectives
 Document must include the knowledge and details of the reason that
led to the advice:
o The proposed insurance strategy
o The key risks and benefits of the recommendations
o Why the recommendation is appropriate for the client
 Would a reasonable person think the advice is likely to leave the
client in a better position at the time the advice provided?
Statement of Advice (SoA) Record of Advice (ROA)
• Strategy & Recommendations
 Product Information
o Explanation of product recommendations, including underlying options
 Replacement Product
o Advantages & Disadvantages/Benefits and Risks of replacement, alignment with
client needs and objectives
o Alternatives
o Loss of material benefits or those that are relevant to needs and circumstances
o Consistently documented across file
General File Requirements
• File / Diary Notes
 Detail is important
 Could a third party read the diary note and understand what has occurred in:
o conversations
o significant client interactions
o relevant discussions to advice provided
 Must be legible
 Must be consistent with other file documentation
• Approved Product Lists
 If recommended product is not on APL approval/authorisation must be on file
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General File Requirements
• Accreditations
 Does the adviser have the appropriate accreditation to provide this advice?
• Tax File Numbers
 Authority is held or TFNs are removed
• PDS
 Evidence that current PDS(s) were provided to clients at or before
recommendation made
• Product Replacement
 Research and Modelling evidence for existing and recommended products:
o Technical information and member/account statements
o Working papers
o Evidence of research
o Comparison tool printouts e.g.. Chantwest
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Implementation
• Authority to Proceed (ATP)
 Signatures & Date
 Amendments
• If the client deviates from the recommendation in the advice document,
 Document on the ATP; or
 Consider whether a new Advice document is needed
• Application Forms
 Reflects what the client agreed to in the Authority to Proceed
• Confirmation of Implementation
 Confirmation from the product provider reflects what is on the application/ATP
(errors can occur that are outside of our control)
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Hints and Tips
• Keep a to do list for file maintenance
• Use Tasks in outlook or utilise Xplan/Coin to keep track of workflow & outstanding
information
• Keep a log of relevant phone calls with dates, who you spoke and topic to:
 underwriters
 clients
 tech support
• Track emails and use archive folders that are easy to follow and identify
• Consistency across the file is important!
 reconcile commissions received with what has been disclosed in the SoA and
noted on application forms
• Take time out for self development and increasing your knowledge around
requirements
Where do I go for support?
• Licensee Website
Team
Service
Contact
Advice Business
Systems
Delivering and supporting technology solutions
for advisers that enable effective client
engagement and compliant advice
[email protected]
1300 738 473
Advice Process
Key advice documentation and support in the
end to end advice process
[email protected]
03 8654 2035
Compliance
Guidance, training and support to achieve our
mutual goals of delivering quality financial
advice to clients
[email protected]
u
02 9234 5477
Adviser
Development
Learning and development requirements to not
only ensure compliance with RG146 CPD
requirements but to assist you in all your
ongoing professional development needs.
[email protected]
02 9234 5787
Technical
Supporting you by brining together quality
advice and legislative support
[email protected]
02 9234 5344
The New Monitoring & Supervision Framework
April 2013
Session objectives
At the end of this session, you will be able to
 Understand the new monitoring & supervision framework
 Advice Quality Scorecard
 Adviser Improvement Plan
 Appeals Process
 Advice Quality Rating
 Vetting process & standards
 Apply the advice assurance standards to your business
 Know who to contact for more information
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Why are we here?
To improve our Monitoring and Supervision framework in the following ways:
•
A fairer & risk based approach
•
Greater engagement & support for advisers
•
Supports the improvement of adviser capability
•
Transparency & consistency.
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New Monitoring & Supervision Framework
• Based on the risks identified
through the compliance review
• Risk-based approach
• Focus on quality of advice
• Fairer scoring methodology
• Formal appeals process
• Improved support
• Risk-based approach
Advice
quality rating
Compliance
review
Vetting
Adviser
improvement
plan
• Adviser support focus
• Clear improvement steps
• Lined to Advice Quality
Rating
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The New Advice Assurance Process
Adviser
File
Pre Review Planning
Improvement
Plan
Assessment
& Review
Reporting
• Communication with
• Application of advice
• Preliminary discussion
Documentation of
adviser & supervisor
quality scorecard
on findings
• Issues identified
• Formal Notification
• Advice quality rating
• Client remediation
• Adviser profiling
• Root Cause Analysis
• Adviser improvement
activities
• File Selection
• Adviser improvement
areas
• Advice quality rating
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Compliance Review
The Compliance Review program emphasises and is conducted on the following
principles:
 Assurance: Identify and manage potential issues that have the ability to
adversely impact clients, your licensee or you (the adviser).
 Transparency and objectivity: A transparent methodology which provides
clear and impartial views of the advice you provide.
•
Each adviser is subject to a formal Compliance Review at least once per year.
•
The Compliance Review process can be broken into the following key stages:
1.Pre-Review Planning
2.File assessment and review
3.Root cause analysis and Adviser Improvement Plan
4.Compliance Review reporting and finalisation
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Compliance Review – Pre Review Planning
Pre Review Planning profiles the adviser in terms of:
• Previous issues
• Common advice strategies and products recommended by the adviser
• Training record
• Authorisations and accreditations
• Adviser’s business operating model & business performance
Pre Review Planning will involve:
1.
2.
3.
4.
Telephone call or email to adviser to confirm availability
Notification of 4 weeks for upcoming compliance review
Discuss with Supervisor / Practice Manager / Regional Practice Manager
File Selection – at least 5 files
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Compliance Review – The Day of Your Review
• Advice Assurance Officer will visit your office on the appointed
day of review
• Expect the Advice Assurance Officer to act with respect &
professionalism
• You will be advised of which files have been selected for the
review
• Advice Assurance Officer will review the files and make a
preliminary assessment for each file
• You will be given the opportunity to clarify or query any of the
preliminary findings
• The Compliance Review is conducted using a risk weighted scorecard according to a
consistent methodology across the Licensee. A scorecard will be completed for each file which
is reviewed and captured in the Compliance System.
•The advice quality scorecard identifies potential areas of risk and rates them accordingly to
the potential size of the risk, as either high, medium or low.
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Compliance Review – The Day of Your Review
The assessment for each requirement will result in one of three possible responses:
•
‘Yes’: There is demonstrable evidence on file that the advice has materially met
the expected requirement
•
‘No’: There is insufficient evidence on file that the advice has met the expected
requirement
•
‘Not applicable’: The requirement was not applicable.
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Advice Quality Rating
Advice Quality
Rating
Total number of issues identified
1
 No issues identified
2
 Low rated issues or
 1 – 2 medium rated issues or
 1 high rated issue
3
Advice Quality
Rating
 2 high rated issues
Extent of Improvement plan activities
4
1
No improvement plan
2
Client remediation
 3 – 4 medium rated issues or
 > 4 medium rated issues or
 3 – 5 high rated issues
5
 > 5 high rated issues
Review policies and confirm understanding
Adviser Improvement Plans with issue validation at next review.
3
Client remediation
Adviser Improvement Plans with potential for risk based issue validation.
4
Client remediation
Pre-vetting (if relevant)
Adviser Improvement Plans with potential for risk based issue validation.
5
Any serious issues will be
referred to senior
management for review.
Client remediation
Pre-vetting
Adviser Improvement Plans with potential for risk based issue validation.
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Adviser Improvement Plan
• Conversation to identify the root cause of any significant findings
• Identify any remediation activities that may be needed for your clients or files
• Recommendations designed to help you improve your capability &
professionalism.
• Supervisor involvement will be to ensure actions have been completed
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Vetting – Key Components
Vetting is required for:
1. New entrant advisers
2. Existing advisers as a result of Consequence management
3. Existing advisers obtaining a new accreditation (eg Gearing) or
authorisation
•
Dispensation for vetting is achieved when you receive approval (either
approved or conditionally approved) on two consecutive submissions.
•
Vetting needs to be adhered to for each of the following authorisation /
accreditation areas:
Authorisations:
1. Risk Protection
2. Superannuation & Investment
3. Retirement Planning
Accreditations:
1. SMSF
2. Direct Equities
3. Gearing
4. Business Insurance
5. Other (eg Agribusiness, Credit)
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Advice Quality Report
• Following the Compliance Review, the adviser will be provided with a comprehensive report
detailing the outcomes of the review and will contain:
•
•
•
•
•
A summary of issues identified and their weighting
The Final Advice Quality Rating as a result of the review
Details of any specific client remediation activities required as a result of the review (as
part of the Improvement Plan)
Details of any adviser improvement activities recommended (as part of the
Improvement Plan)
A summary of areas that were observed to be working well by the Advice Assurance
Officer.
• The Advice Quality Report will be issued to you as “Draft” within 5 business days from the day
of your review.
• You will have 10 business days to accept or question the report. Any questions you raise
regarding the report will be considered and then a final report will be issued to you.
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Appeals
• Should the adviser be in dispute of the review findings after the debrief and final report, their
supervisor may lodge a formal appeal on their behalf if they are supportive of the adviser’s
views.
• After receipt of the final report, you may lodge an appeal within 5 business days.
• Grounds for appeal may include:
– A procedural or administrative irregularity which has occurred, and was not rectified to a
satisfactory standard during the report finalisation stage.
– Sufficient evidence is available to support changes to the decision made
– The reviewer has been biased or made a significant administrative error
– There is ambiguity in the application of current business rules or standards.
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What are the requirements?
Financial Services Guide (FSG)
There is evidence that the client was provided with the current
Financial Services Guide (FSG)
Medium
• What are the file requirements for provision of an FSG?
• The client file must provide evidence that the client received an FSG at the
appropriate time and which FSG was provided ie. Version
• What does this evidence look like?
• FSG Receipt and/or Diary Note
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Anti-Money laundering/Counter Terrorism financing
(AML/CTF)
The licensee’s client identification process has been followed (ie.
AML/CTF)
High
• Special consideration should be given to enhanced due diligence requirements for
higher risk clients
• What are the file requirements for identification and verification of
clients?
• Client identification form
• Appropriate identification (eg. Drivers Licence)
• Diary Notes outlining procedures taken in conducting the identification
process
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Discovery/Data Collection – Fact Find
There is a fact find on file, including signed acknowledgement by both
the client and the adviser.
Low
• Ensure the relevant sections of the fact find are fully completed
including:
- current situation
- needs & objectives
- existing policy & fund details
- research into existing policies & funds
- adviser & client signature
• It is important to remember to date the document and ensure that no
sections are left blank.
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Discovery/Data Collection – Fact Find
The client’s reason for seeking advice (i.e. their needs and objectives
has been appropriately identified
High
• Client needs and objectives are the foundations for best interest
• Includes both implicit and explicit needs
• Objectives, financial situation and needs of the client that would reasonably
be considered relevant to the advice sought on that subject matter must be
identified (client’s relevant circumstances)
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Discovery/Data Collection – Fact Find cont.
The adviser has taken appropriate steps to conduct relevant product
research.
Medium
• Investigation into ‘from’ funds and policies is required and needs to be
documented on the file in detail.
• Utilising a fact find to do this is good practice
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Discovery/Data Collection – Risk Profile
The client’s risk profile has been appropriately documented in
accordance with Licensee approved tools and advice documents.
High
What are the file requirements for the risk profile?
 evidence of determination of risk profile using approved licensee tool
 diary note for any changes due to client instructions
 calculations in tool correct
• Information and Risk profile determination must be consistent with facts gathered
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Discovery/Data Collection – Fact Find cont.
The agreed scope of advice is appropriately defined, supported and
consistently documented.
Medium
This will include considering:
•
•
Complexity of advice given
•
Capacity of the client to understand the advice they are receiving
•
Potential impact of inappropriate advice on the client
•
The extend of client directed needs & objectives
In some instances, the SOA may be the sole document in which the scope is
defined & documented
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Strategy & Recommendation
The recommended product/strategy meets the client’s key needs and
objectives
High
The foundation for reasonable basis has been established and
documented for the recommended strategy and/or financial product.
Medium
• Document must include the knowledge and details of the reason that led to the
advice:
 The proposed investment strategy
 The key risks and benefits of the recommendations
 Why the recommendation is appropriate for the client
 How the recommendation meets the clients needs & objectives
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Strategy & Recommendation cont.
The advice is likely to be in the best interests of the client.
High
Would a reasonable person think the advice is likely to leave the client in a better
position at the time the advice was provided?
The recommendation to replace an existing product contains sufficient
or adequate information to explain and support the recommendation.
High
Research and Modelling evidence for existing and recommended products:
 Technical information and member/account statements
 Working papers
 Evidence of research
 Comparison tool printouts eg. Chantwest
43
Strategy & Recommendation cont.
The advice document contains discussion on the expected
advantages and implications of the recommended strategy.
Medium
• Replacement Product
• Advantages & Disadvantages/Benefits and Risks of replacement,
alignment with client needs and objectives
• Alternatives
• Loss of material benefits or those that are relevant to needs and
circumstances
• Consistently documented across file
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Strategy & Recommendation cont.
The gearing recommendation meets suitability requirements and
considers the clients capacity to service the loan.
Medium
High
The advice provided meets suitability requirements and is consistent
with legislative requirements for Self-managed Superannuation
Funds.
The advice appropriately considers the impact of superannuation
contribution caps where applicable.
High
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Strategy & Recommendation cont.
Products recommended were on the APL or they were recommend with
documented approval from Research
High
Recommended asset allocations are consistent with the agreed risk
profile, or with explanation.
High
• Identifying a clients tolerance to risk is important and should be done in
conjunction with the appropriate risk profiling tools.
• Clients should be educating around risk and the potential of loss to their
portfolio.
• All discussions regarding risk tolerance should be clearly articulated in the client
file.
• Investment of funds should then be made in accordance to the clients risk
profile; or where not appropriate documentation of explanation is required.
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Strategy & Recommendation cont.
High
The financial products/strategies recommended (or commented on)
were within the scope of the representative’s authority or
accreditation.
The relevant fees, commissions, soft dollar benefits and costs of
recommendations were all correctly disclosed in writing.
High
Relevant mandatory disclosures or warning have been included in the
advice document
Low
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Implementation
The relevant documents have been signed by the client in accordance
with the RI business rules.
Low
Authority to Proceed (ATP)
• Signatures & Date
• Amendments
48
Implementation cont.
Implementation has been carried out as agreed with the client including
accurately completing application forms.
Medium
• Confirmation of Implementation
• Confirmation from the product provider reflects what is on the application/ATP
(errors can occur that are outside of our control)
• If the client deviates from the recommendation in the advice document,
• Document on the ATP; or
• Consider whether a new Advice document is needed
• Application Forms
• Reflects what the client agreed to in the Authority to Proceed
49
General File Requirements
The advice file contained adequate file notes and were of a sufficient
quality.
Medium
• Detail is important
• Could a third party can read the diary note and understand what has occurred in
•
conversations
•
significant client interactions
•
relevant discussions to advice provided
• Must be legible
• Must be consistent with other file documentation
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General File Requirements cont.
Ongoing service requirements/obligations have been met by the adviser
Medium
There is evidence that the client was provided with the relevant PDS
Medium
• Evidence that current PDS(s) were provided to clients at or before
recommendation made
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General File Requirements cont.
All personal advice has been provided in writing in an advice document
Low
The advice document was provided to the client as soon as practicable.
High
Time critical advice was used in the appropriate circumstances and was
provided ot the client within 5 business days.
High
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Where do I go for support?
Team
Service
Contact
Advice Business
Systems
Delivering and supporting technology solutions for advisers that enable
effective client engagement and compliant advice
[email protected]
Advice Process
Key advice documentation and support in the end to end advice process
[email protected]
1300 738 473
03 8654 2035
Compliance
Adviser Development
Technical
Guidance, training and support to achieve our mutual goals of delivering
quality financial advice to clients
[email protected]
Learning and development requirements to not only ensure compliance with
RG146 CPD requirements but to assist you in all your ongoing professional
development needs.
[email protected]
Supporting you by brining together quality advice and legislative support
[email protected]
02 9234 5477
02 9234 5787
02 9234 5344
53
Questions
?
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