Policy summary
Records of advice are a simple and effective way of providing ongoing personal advice to your existing clients. On meeting the conditions set out in this policy, you can provide further advice to your clients without the need for a Statement of Advice (SoA). In this instance, the further advice can be provided to the client either verbally or in writing, with a record of that advice being retained on the client file for future reference.
An RoA can be used when:
· The client has an SoA from you or another authorised representative from the same practice; and
· With regard to the further advice:
o The subject matter is consistent with the advice provided in the previous SoA; and
o The basis of advice is not significantly different to the basis used in the previous SoA; and
o The client's personal facts and circumstances that you relied on when providing the previous SoA, are not significantly different such that they change the basis of this advice.
This policy provides guidance in understanding:
· The circumstances in which the RoA for further advice can be provided;
· How to determine whether the client's relevant personal circumstances or the basis on which the further advice was given are 'significantly different';
· How to provide further advice to your clients and the relevant documentation, and
· Your legal obligations when providing further advice in the form of an RoA.
Policy users
All planners
Last updated
12 December, 2008
Licensee standard
What is a record of advice?
The Record of Advice (RoA) is designed to facilitate relatively simple ongoing advice for clients where their personal circumstances and basis for the further advice are not significantly different from the previous SoA in terms of:
· the recommendation/s;
· the basis for those recommendations; and
· the personal facts and circumstances that were taken into consideration in making those recommendations.
For example, you may have previously provided personal advice to a client on their income protection needs, documented in an SoA. The client has recently received an increase in their salary and is now seeking further advice on increasing their income protection only. On determining that the client's personal facts and circumstances are not significantly different to the previous advice, and the basis is also not significantly different, you can use the record of advice conditions for the further advice.
Where you meet the conditions for RoA use, the further advice can be provided either verbally or in writing. Whichever applies, there must be a documented record of this advice on the client file. The RoA summarises the recommendations and the basis on which you provided them, such as how the advice meets the client needs. There are also certain disclosures that must be made to the client, such as:
· remuneration and other benefits;
· conflicts of interest; and
· if applicable, replacement of product consequences.
This policy sets out in more detail the process that you can use in providing ongoing advice with an RoA, and the relevant documents that you can use to record your advice.
/ If a significant change occurs to the client's circumstances, or your further advice starts to deviate significantly from your initial recommendation, then an RoAcannot be used to record the advice.Conditions to be met prior to providing further advice in an RoA
There are certain conditions that must be satisfied before using an RoA:
1. Your client has received a Statement of Advice (SoA) from you or your practice.Note: Where two practices and their employees merge into one business, only the Authorised Representative who originally prepared the SoAcan produce further advice via an RoA.
2. With regard to the further advice:
· The subject matter is consistent with the advice provided in the previous SoA; and
· The basis advice is not significantly different to the basis used in the previous SoA; and
· The client's personal facts and circumstances that you relied on when providing the previous SoA, are not significantly different such that they change the basis of this advice.
/ An RoA must always refer back to the original SoA, that is, it cannot refer back to a previous RoA or Financial Plan. If you have provided further advice a number of times through an RoA, there may be a point in time where the client's relevant personal circumstances or basis of advice differ significantly from the original SoA. Where this occurs, you will have to produce a new SoA for the further advice.
What does significantly different mean?
The legislation does not define when a client's relevant personal circumstances or the basis for the advice will be considered to be significantly different. Given that personal advice contained in an SoA is particular to an individual client, what constitutes a significant difference in the circumstances may vary from one client to another.
By way of example, a change in annual income of $20,000 may represent a significant change in the financial situation of a person with an annual income of $50,000, but may not be a significant change for a person with an annual income of $200,000.
Based on the individual circumstances and needs of your client, it is your responsibility to determine whether or not the client's relevant personal circumstances or basis for the further advice are significantly different compared to the advice contained in the previous SoA. You need to be in a position to justify the basis for this determination.
See 'Determining a significant difference' in the How to section for more information
/ If there is any doubt as to whether there is a significant difference from the previous advice regarding the relevant personal circumstances or the basis on which the further advice is being provided, you should not use an RoA.Detail on disclosure requirements
If you satisfy the conditions for using an RoA, you must still disclose to the client the following information which would have been included in the SoA:
· remuneration and other benefits;
· conflicts of interest; and
· if applicable, replacement of product consequences.
The law requires that this information be given "at the same time or as soon as practicable after the further advice is given to the client."
Below we set out how you can meet these disclosure requirements:
Remuneration (including commission) disclosure
The RoA only needs to disclose any additional fees related to the further advice. Fees for existing products that were previously disclosed in an SoA do not need to be re-disclosed in the RoA. Additional fees requiring disclosure may include:
· Fee for service in relation to the further advice;
· Initial commissions related to the further advice; and
· Ongoing commission and fees particular to the further advice only.
Unless you are providing 'hold' advice, you must provide remuneration disclosure in the Advice and product fees for this advice document and provide this document with the RoA to the client as soon as practicable after the further advice is given to the client.
Fees for existing products that have previously been disclosed in an SoA do not need to be re-disclosed in the RoA. The RoA only needs to disclose any additional fees related to the further advice that has not been outlined in the previous SoA. Fees requiring disclosure may include:
· Fee for service in relation to the further advice;
· Initial commissions related to the further advice; and
· Ongoing commission and fees particular to the further advice only.
For example, let's assume the client has an existing super and non-super investment product. The further advice to the client is to add $20,000 to the existing superannuation product with the following commission applicable:
· the $20,000 contribution generates initial commission of $600; and
· the $20,000 contribution increases annual ongoing commission from $250 to $350.
Based on this scenario, the following disclosure is required within the RoA:
· the initial commission of $600;
· the additional trailing commission of $100 only, and
· any associated product fees that are new eg management fee for a new investment option.
Where additional fees are applicable, this remuneration disclosure must be provided in the Advice and product fees document. This document must accompany the RoA and be provided to the client as soon as practicable after the further advice is given.
Disclosure of 'other benefits' and conflicts of interest
Information about 'other benefits' and conflicts of interest are set out in the Financial Services Guide (FSG).
You can disclose this information by giving the client a copy of the current FSG during the meeting in which the advice is given.
If the client already has a copy of the current FSG before you provided the further advice, you can inform the client that this information is contained in the FSG, as long as you confirm with the client that he or she is happy to refer to the FSG for this information. However, you must send the client another copy of the current FSG if the client asks for a copy or says that he/ she cannot locate the FSG.
Replacement of Product - disclosure requirements
Where the further advice results in the replacement of an existing financial product, you must provide replacement product disclosure in the "Consequences and potential lost benefits document" and provide this document with the Advice and product fees for this advice document and the RoA to the client as soon as practicable after the further advice is given to the client.
The RoA must disclose to the clients:
· Any charges the client may incur; and
· Any benefits the client may lose; and
· Information about any other significant consequences for the client in acting on the further advice.
Advice process - RoA for further advice
The following outlines the advice process when providing further advice in the form of an RoA.
Financial Services Guide
As is the case with any financial service, you must ensure that the client has a current version of your FSG and any SFSG before providing any advice. In many cases, this will provided to the client at the meeting and prior to the provision of any financial service. Where the meeting takes place via the telephone, you can email the FSG/SFSG to the client before providing advice.
If the client insists on receiving the financial service immediately and it is not practicable to provide the FSG/SFSG before the provision of advice, you must comply with the "time critical" FSG requirements.
Refer to the time critical advice policy for further guidance.
File review and reasonable basis for advice requirement
In the initial contact from the client, there will be discussions regarding the further advice needs of the client.
You will need to review the SoA previously given to the client and the other relevant documents on the file (such as the fact find) so that you will be in a position to determine whether the client's relevant personal circumstances and the basis of the advice have changed. Evidence of this review and any updates to the Fact Find should be kept on the client file.
As with any personal advice situation, a reasonable basis for the further advice must be established by:
· Determining the relevant personal circumstances in relation to the further advice; and
· Making reasonable inquiries into those relevant personal circumstances; and
· Considering and investigating the subject matter for the further advice.
This process will enable you to assess whether the further advice is significantly different from the previous advice in terms of the client's relevant personal circumstances and the basis on which the advice is being provided.
For further guidance on establishing a reasonable basis for advice, refer to the Determining Advice Requirements advice policy.
Documenting the further advice
Whether the further advice is provided verbally or in writing, legislation requires that a record of the advice (RoA) be maintained on the client file for 7 years from the date of the advice.
The requirement to physically provide the client the RoA upon the provision of the further advice will be determined by whether the recommendation results in retention of the existing advice (a hold recommendation) or a further action on the client's part. In either instance, the details of the advice must be recorded in writing using either the RoA file note or RoAletter template and placed on the client file.
Where the client agrees to a hold recommendation of their previous advice, while best practice, you are not required to physically provide the RoA to the client unless they request it. In this instance, you are still required to maintain the RoA on a client file.
For all other situations, including where a client disagrees with your hold recommendation, you must provide the RoA to the client in writing. This must be done no later than 5 business days from providing the further advice to the client (but sooner if possible). The RoA must also include the relevant disclosure requirements referred to in the Detail on disclosure requirements section of this policy.
Where the RoA needs to be provided to the client in writing, a section for the client to acknowledge the advice is provided in the document. Having this acknowledgment on the client file provides evidence that they have read the advice and either agreed or not agreed to proceed with your recommendations. AMPFP recommends that the client signature be obtained where possible, yet understands this may not occur on all occasions. Where this happens, you are required to have confirmation that the copy of the RoA containing the acknowledgement section has been provided to the client.
For more information on how to complete the RoA, including which template may be most appropriate for the situation, refer to 'How to document your advice' flowchart within the How to section of this policy.
/ What if you have given advice and the client disagrees?When this occurs, you must not alter your original recommendations to meet the client's wishes, as doing so will be seen as you endorsing these changes as your own advice.
You need to reflect the client's request within the client acknowledgement section of the record of advice and file notes. This is particularly critical where you believe the client is taking on risk in not implementing your recommendations.
Lodgment register