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12

The Documents Part 12 – The File Note

A file note is a record of an adviser’s conversation with a client.

Risk management is an essential element of good business practice.   For authorised representatives maintaining a clear and up to date paper trail is critical to manage risk. Auditors that I come into contact with bemoan the poor quality of files notes and grieve that in many cases file note are non-existent.

What is a file note?

Files notes are used to supplement a client’s file with details of the interaction and are a critical component of demonstrating compliance during the advice process and any ongoing conduct. Good file notes can keep you out of jail.

If you are questioned by a cross-examiner, they will ask you to recall things and if you have documents that you prepared at the time of the conversation, obviously they’re going to be more credible.

What makes a good file note?

Effective file notes are characterised by four key features, namely being:

Clear:                         they must be able to be read and understood by a third party

Comprehensive:      all critical points must be covered in sufficient depth

Current:                    taken during or soon after the client meeting with all aspects covered

Concise:                    contains all relevant information and detail

What should file notes include?

  • Date of the discussion
  • Who was involved
  • The reason for the contact between client and the adviser
  • Objectives and issues raised
  • An outline of the discussion, without repetition of information captured by other tools (like a fact find)
  • All decisions made or agreements reached
  • Links to the fact find and any advice provided (providing background information & the client’s wishes)
  • The ‘tone’ of the discussions — friendly, cautious, worried, tense, etc.
  • Next steps or actions required
  • All records being signed and dated.

Authorised representatives of fwgs will have access to the Portal which pre-populates relevant file notes with additional free fields to capture the points mentioned above.

Final Tips

It is no exaggeration to say that file notes could be the difference between the ability to continue practicing or not. File notes are less about facts which are contained in a Needs Analysis or a Statement of Advice and more about an advisers suggestions and the client’s responses. This is particularly important if a client changes their mind during a meeting. ASIC has an expectation that working papers and notes are contained in every client file and it will be very difficult to an authorised representative to protect themselves if a complaint arises and file notes are absent.

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11

The Documents Part 11 – SoA (Safe Harbour Port 7)

Safe Harbour Step 7 – Adviser needs to take ‘any other step that, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client, given the client’s relevant circumstances.

 What you need to do to satisfy this step varies depending on the circumstances. You may need to undertake the following steps, if you have not already done so:

  1. explain clearly to the client the advice service that is and is not being provided;
  2. if the advice includes an SMSF recommendation, provide related strategic recommendations that benefit the client;
  3. specify in the advice that the client should review any decision made about financial products on the basis of the advice provided:
  • a. once after a period of time
  • b. regularly (e.g. every one or two years; or if the client’s circumstances change

Conclusion of Know your Product  

By now it is obvious that the requirements for accountants to provide advice is no simple matter. When finance wise audits individual files there are at least 32 steps that are assessed.  As most accountants will have no experience in completing a Statement of Advice it is vital that your licensee has a standard template to reduce the administrative time taken to prepare the document, the have para planning capacity in order for you outsource the responsibility, experienced advisers to provide real time assistance and a help desk.

The FWGS template compiles the Needs analysis data directly into the file allowing the adviser time to complete the switching advice and make their recommendations.

Education Guides 

Education Guides are templates on specific subjects that must be included in the appendix of all SoA’s where an SMSF is recommended.

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10-red-number

The Documents Part 10 – SoA (Safe Harbour Port 6)

Safe Harbour Step 6 – All judgements made by the adviser are based on the client’s relevant circumstances 

To rely on the safe harbour test, you must base all judgements you make in advising the client on the client’s relevant circumstances. This includes the judgements that you as the adviser make about:

  1. the scope of the advice;
  2. the extent of the inquiries you make into the client’s relevant circumstances;
  3. the strategies, and types of financial product and specific financial products you investigate;
  4. the strategies, types of financial product and specific financial products you recommend; and
  5. how the client should acquire financial products, where relevant for example, whether the client should acquire products directly or through a platform.

To satisfy step 6 of the safe harbour test, a reasonable adviser would have to believe that the client is likely to be in a better position if the client follows the advice.

Other articles in this series:

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If you found this article interesting, why not
  • SEND it to a friend from the sidebar
  • LEAVE A COMMENT by clicking on the icon at the top of the article
  • Send FEEDBACK directly to us at info@fwgs.net.au