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The Documents Part 3 – Needs Analysis (Introduction)

Under the Future of Financial Advice (FoFA) Reforms, there is a specific requirement under law to act in the best interests of your client when providing personal advice (‘the best interests duty’).

The new requirements have been introduced with the aim to improve the quality of advice and ensure that the advice you give is:

  1. appropriate for the client;
  2. in the client(s) best interests; and
  3. that the client(s) priorities rank ahead of your own

Prior to the FoFA reforms, responsibility for the advice given by advisers previously rested with the licensee. Under FoFA, each individual adviser (i.e. not the licensee), will be responsible for the advice they give and may face civil or administrative sanctions should they breach their obligations under the law.

Acting in the client’s best interests

You need to demonstrate that you have acted in your client’s best interests when you give personal advice. To do so you need to demonstrate that you have satisfied each of the following:

  1. that a ‘reasonable advice provider’ would conclude that the client would be likely to be in a better position as a result of your advice; and
  2. that you have complied with the safe harbour steps.

When administering the law, ASIC will ask whether a ‘reasonable advice provider’ would believe that the client is likely to be in a better position if they follow your advice.

Safe Harbour Steps

Complying with the seven safe harbour steps will assist you demonstrate that you have acted in the client’s best interests under law. The Needs Analysis document demonstrates that an advisor knows their client which satisfies the first three ports of the safe harbor.

  1. Identify the client’s circumstances through client’s instructions
  2. Identify from the client’s instructions, their objectives, financial situation, and needs. Where possible, try to capture this information in the client’s own words.
  3. Identify the subject matter of the advice and the client’s relevant circumstances

Safe Harbour Step 1 is detailed in the next article.

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The Documents Part 2 – Financial Services Guide (FSG)

Every interaction between the client and the authorised representative begins with the FSG. The relevant regulation is CORPORATIONS ACT 2001 – SECT 942C which outlines a number of provisions which we will summarise below.

What

A FSG provides a client with relevant information that confirms the person providing the advice has the appropriate authority. This form is a standard template and will rarely be changed.

A FSG contains the contact details of the licensee and the providing entity, information about the authorised representative including the type of advice for which they are authorised, their fees and charges, the process if there is a complaint and the Date the FSG was prepared.

Who

The authorised representative must forward this to every client when it becomes apparent that advice will be required. If someone is making an appointment they are seeking advice and thus in the finance wise portal the FSG is emailed automatically to clients as soon as an appointment is made.

In a typical situation a client will phone your office to make an appointment. The person who makes the appointment will confirm their name and contact details including an email address. Typically, an SMSF will comprise of at least 2 members and if each member has a separate email address then each member will receive an FSG.

If the email bounces the authorised representative will receive an email and will contact the client or check their client records and update them in the portal and an FSG will be sent to the correct address(es)

When

The FSG is sent immediately when a client’s email address is entered.

Why

By sending the FASG automatically it ensures the practice is complying with the ASIC requirements.

But what if ..

  1. Additional members arrive at the meeting? Their contact details will be entered into the portal as a standard component of the advice process and an FSG will be emailed to those members.
  2. Additional members join the fund after the SoA is completed. You will be required to forward these members an FSG

The finance wise portal populates a file note to confirm the date and time that the FSG has been sent.  When an audit is performed information about the FSG transmission is automatically available to auditors as this information stays on our system for at least seven years.

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The Documents Part 1 – Introduction

After the accounting exemption expires on 1 July 2016 accountants will be required to complete certain documents at specific times. Some documents are merely for information and other documents require clients to sign them.

It can be very confusing to get your head around who does what and when in the advice continuum.  To help simplify the process, finance wise are currently producing a number of videos to assist with the transition.

In the next series of articles we highlight what documents are required, what information the documents contain and when the documents need to be provided.

The documents are:

  1. Financial Services Guide (FSG)
  2. Needs Analysis
  3. Anti-Money Laundering
  4. Risk Profile
  5. Statement of Advice (SoA)
  6. Education Guides

Read the next article for more information about the Financial Services Guide (FSG).

Register your interest in becoming a finance wise Limited Authorised Representative (LAR).

If you liked this article:
  • SEND it to a friend from the sidebar
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  • Send FEEDBACK directly to us at info@fwgs.net.au