“Woke up this morning
I suddenly realised
We’re all in this together”
— Ben Lee – “We’re all in this together”
Adapting to change
Experienced advisers know that clients most appreciate their adviser’s insight and reassurance when conditions are bad; during periods of market volatility, economic uncertainty and generally bleak sentiment, clients understand the value their adviser offers. Even in respect of COVID-19 and the pandemic’s broader implications and consequences, frequent, clear and empathic communications will, even in the face of uncertainty, help to reassure your clients and secure the sustainability of your personal advice business.
We all need to be connected. In reality, it’s this sense of connection that will ensure the advice profession ultimately overcomes the challenges posed by digital advice and direct services.
Experienced advisers are well-equipped to provide reassurance while managing uncertainties and risks, but the current challenge for even the most experienced advisers is how to do so without the personal connection of face-to-face meetings.
We don’t have all the answers, but we do have some suggestions on how you can manage these challenges.
Asset protection (or, if you prefer, client data management)
“You must ensure that your records of your clients, including former clients, are kept in a form that is complete and accurate.”
— FASEA Standard 8
It might not be sexy, and it’s a perennial issue, but it’s your record keeping processes that are the most reliable indicator of whether you’ll prosper in a disconnected environment.
(Incidentally, poor record keeping is often the root cause of advisers’ failures to meet, or exceed, their compliance obligations).
Both Licensees and advisers are required to keep adequate records of the advice and services they provide; the former have licence conditions and the latter have this obligation as a consequence of their appointment or authorisation. While advisers’ obligations are often articulated in their Licensee’s Compliance Manual or their Employment or Authorisation Agreement, FASEA Standard 8 explicitly addresses their professional and ethical obligations to retain and secure client records.
You may retain and secure this information already but, in the current environment, how easily can you locate, access and share the information you hold.
Where relevant client information is spread across emails, off-system file-notes and SMS you have limited capacity to provide the seamless service your clients have a reasonable right to expect. Emigrating to a digital environment will require you to consolidate and better manage these disparate records.
The reality is that disparate and disconnected systems (particularly localised systems) reduce efficiencies, increase the costs of managing information and introduce additional, and undesirable complexity. The usual solution recommended for these sorts of issues is to adopt a ‘single source of truth’. It’s generally true that businesses with a single CRM and information management system are better organised, but it’s equally true that transitioning a mature business to this model is neither painless nor convenient.
- Draw a line in the sand now and try to go ‘fully digital’.
- Consider how applications like OneNote, DropBox and Trello can help you transition.
- Speak to Umlaut or engage external experts like Elixir Consulting for the transition and change over period.
- Talk to us about how to optimise, manage and document your new arrangements.
- Try to adopt a ‘single source of truth’ for your Licensee.
- Extract attachments from emails and save the documents individually.
- Segment client files and save documents, consistently, in each folder.
- Peer check files at each milestone.
- Remember that any interaction during the advice process, should be recorded and saved.
Reputation management (or, if you prefer, documenting consent)
“You may act for a client only with the client’s free, prior and informed consent. If required in the case of an existing client, the consent should be obtained as soon as practicable after this Code commences.”
— FASEA Standard 4
Despite increasing regulation, the fundamentals of advice haven’t changed. Prior to considering your clients personal circumstances or providing a recommendation, they’ll need to understand whether and how you can help them and agree that you should.
If you need more dots joined, you are now required to ensure that your client understands the terms of your engagement (including your influences, restrictions, biases and limitations) and agrees to proceed in full knowledge of that information.
One of the things I’ve noticed in reviewing client files is that a lot of advisers simply rely on the fact that they’ve provided an FSG and an SOA and retained an Authority to Proceed. That’s compliant, but it’s not enough to satisfy the Code of Ethics. Aside from addressing and explaining commercial arrangements, privacy and the scope and type of the services, taking the time to ease your client through the regulatory requirements in a simple and effective manner, establishes that their consent and agreement is reasonable. – Ben
The nature, scale and complexity of your business and, in particular, your services and client make-up, will determine how you’ll approach this requirement. The better Licensees, and the more experienced advisers, already tailor their requirements to their clients’ experience and sophistication, their needs and the complexity of the products and strategies they are likely to need.
Standard 4 allows you flexibility, and we’d encourage you to consider how best you can obtain your clients’ consent and confirmation. If you’re an adviser, contact your Licensee to ascertain how they believe validation and consent should be confirmed but remember that this is your personal obligation, so apply your perspective to their requirements. I’d also encourage you to think beyond ‘wet signatures’: real understanding, and informed consent, can be demonstrated in any number of ways – and often more convincingly than by a signature on a piece of paper. – Sean
Better technology, including the use of digital and electronic signatures, provides you with more options but you need to balance client convenience and efficiencies against the conservatism of product issuers. While Courts are happy to accept digital documents, many platform providers still require wet signatures (although we understand most have abandoned their preference for copperplate script in triplicate).
Irrespective of the technology you use, or your physical proximity to your client, as an adviser you need to be particularly diligent about confirming, retaining and evidencing your client’s authority and consent.
- Implement Terms of Engagement into your advice process.
- Don’t provide personal advice without being formally engaged.
- Regularly communicate with your client (by email, SMS or teleconferencing) and retain both your communications and their responses.
- Retain client questions and acknowledgements.
- Speak with Umlaut.
- Obtain clarity from the Licensee to confirm what forms of consent and confirmations are acceptable.
- Record how you present the FSG and run your discovery process. If you have a standard process, prepare a video that you can share with prospective clients.
Managing regulatory risk (or, if you prefer, positioning costs and benefits)
“All advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances. You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.”
— FASEA Standard 5
The minimum legal requirements imposed by the Corporations Act, so beloved by (plaintiff) lawyers and so impenetrable to some financial product advisers, requires advice professionals to act in the best interests of their client and provide appropriate advice.
These are, on the face of it, simple obligations in theory that, in reality, are often difficult to interpret and operationalise. We can help, but we need to emphasise that these legal obligations are now complemented by your ethical obligation to ensure that your client understands all aspects of your advice. In addition, you have to have reasonable grounds to be satisfied about their understanding.
Face to face, you have a greater number of ways to assess their understanding and response to your advice. The subtle side glances clients offer each other, their changes of posture from disengaged to excited or their unblinking gaze of utter confusion and incomprehensibility are all vital cues to their understanding and engagement. Likewise, the questions they ask and the frequency and speed of their conversation help in this regard. Unfortunately, these cues are less obvious in a phone call or video link (unless further tools are used).
Advisers often embrace technology to deliver advice but few of them consider how technology, particularly collaborative applications, can be used in the Discovery and Formulation stages. Subject to privacy and security issues, one would imagine that Standard 5 would be easily satisfied by an advice process that collaboratively involves clients in the advice process and records, in real time, their specific engagement. – Sean
Technology should not be seen as the entire solution but instead as a key tool for supporting the process changes you’ll need to implement. Even without a dedicated IT Team, or access to slightly-motivated Gen Z, you can implement applications and easily available software to improve your capability.
If you need more help, let us know.
- Consider how Facetime, GoToMeeting, Google Hangouts, Zoom or Skype can provide an effective substitute for face to face meetings. View the tutorials below.
- Record client interviews and presentations. Don’t do so without obtaining your client’s permission first. It’s relatively simple if you are using Skype for Business, Google Hangouts or Zoom (but be careful with Zoom)
- Send digital Statement of Advice (as Word, PDF or Powerpoint) to the client prior to the meeting and go through this together.
- Set up a video conference to present and discuss the advice. Before you embrace video-conferencing consider your environment, your infrastructure and your technology. For some additional tips on how to make better video calls read this article.
- Routinely check back with the client during the conversations and re-confirm aspects.
- Use surveymonkey or similar applications to get client feedback on your presentations and/or test their understanding of your advice.
- Develop and share interactive tools that enable your clients to test your modelling and assumptions.
- Share your fact find, notes and Statement of Advice through Google Docs, Confluence , Dropbox Paper or Word. This tools will enable your clients to complete or amend these documents or collaborate in real time. For other collaborative applications read “Top real-time document collaboration tools for Team productivity”.
- Review the content of the advice to make it simpler and more client friendly.
“It is very important that you continue to keep records of the financial services you provide during the COVID-19 period. Your records should, for example, allow you to demonstrate that you have complied with the best interest duty and related obligations, which will be critical in the future if you receive a client complaint or if your file is audited. Records include more than just the fact find and SOA. They include other documents that support your advice such as working papers, research and file notes.”
— ASIC “COVID-19 information for advisers and advice licensees”, 3 April 2020
In their recent publication “COVID-19 information for financial advisers and advice licensees”, ASIC acknowledged that the Corporations Act provides advisers with considerable flexibility around the provision of advice. In addition to highlighting the availability of “time-critical” disclosure exemptions, ASIC note that advice, and factual information, can be provided by email, telephones, videoconferencing, via the internet or through a combination of these options.
They note, for example, that:
- meetings and reviews can be conducted remotely and don’t require proximity;
- fee disclosure statements (FDS), renewal notices and opt-ins in respect of ongoing fee arrangements can be sent and received electronically and executed using electronic or digital signatures
- advice documents (e.g. Statements of Advice (SOA) and (Financial Services Guides (FSGs)) can be sent and received electronically and signed using electronic or digital signatures.