Good advisers don’t care about their clients or their clients’ interests because the law requires it; they do it either because of an ethical duty, a professional obligation or because they simply recognise that it is “the foundation of a sustainable business”. Compliance aside, Client Care improves acquisition rates, increases customer loyalty and reduces attrition.
Unfortunately, the Royal Commission identified numerous instances where Licensees and advice providers cared little for their clients (or their clients’ interests). Perhaps to lessen the impact of incumbency, inconvenience and apathy, the Law now requires them to regularly turn their minds to the commercial benefits and ethical reasons for a better focus on client care and practice.
Section 921B(5) of the Corporations Act 2017 now requires that all advisers meet the requirements for Continuing Professional Development (CPD) set by The Financial Adviser Standards and Ethics Authority (FASEA). This is hardly groundbreaking and while Standard 10 of the FASEA Code of Ethics states that advisers must develop, maintain and apply a high level of relevant knowledge and skills this has always been the intent of CPD.
The innovation is contained in FASEA’s FPS004 CPD Policy that prescribes the competency areas that must be demonstrated for ongoing professional practice. One of those competency areas is focused on Client Care and Practice.
What does this mean in practice?
For new Graduates
FPS004 states that competency areas must broadly align with the graduate outcomes expected of qualifying practitioners and the work and training standard. Graduate level outcomes per the Australian Qualifications Framework (AQF). AQF 7 suggests graduates at this level will have broad and coherent knowledge and skills. If Client Care and Practice largely relates to skills, AQF 7 describes skills as well developed cognitive, technical and communication skills to select and apply methods and technologies to:
- Analyse and evaluate information to complete a range of activities;
- Analyse, generate and transmit solutions to unpredictable and sometimes complex problems; and
- Transmit knowledge, skills and ideas to others.
At this level, Graduates are expected to apply knowledge and skills to demonstrate autonomy, well-developed judgement and responsibility in contexts that require self-directed work and learning and within broad parameters to provide specialist advice and functions.
This requires more than discretionary reading supported by multiple choice questions.
This type of CPD activity would be hard-pressed to meet graduate competency level outcomes. CPD activity needs to develop competency at a level that allows advisers to demonstrate autonomy, well-developed judgement, and generate and transmit solutions to unpredictable and sometimes complex problems.
This means CPD material needs to be thought provoking that facilitates discussion; engages the learner in practical and relevant scenario-based learning. And it should give the learner an opportunity to develop their judgement skills so that they can generate and transmit solutions to complex problems.
For Current Advisers
Current advisers have the same obligation. Their CPD programme should likewise facilitate their application of knowledge, skills and well-developed judgment to demonstrate autonomy, well-developed judgement in context to evidence their well-developed cognitive, technical and communication skills. While their focus is identical to new graduates, there should be higher expectations of current advisers and these should reflect the activities, authorisations and experience of the specific adviser.
Care and Practice in practice
The Client Care and Practice competency area didn’t develop in a vacuum but developed as a result of ASIC’s previous research project on how to uplift training standards for financial advisers. ASIC’s CP 212 Licensing: Training of financial product advisers (Update to RG 146 ) was based on extensive Cognitive Task Analysis (CTA) research ASIC commissioned to determine the knowledge and skills required to provide quality financial advice.
This CTA research was the reason why ASIC recommended that RG 146 needed to be reconfigured to reflect the primacy of advice skills in effective advice provision (including changes to the skill requirements).
In our view, this research (and ASIC’s insights) are particularly helpful for understanding the Client Care and Practice competency area.
In particular, we’d suggest your focus should be on skills and training that relate to:
- the primacy of the client in the advice process; and
- communication with the client in a manner that the client understands.
The primacy of the client in the advice process focuses, first and foremost, on establishing rapport with the client and embedding them at the centre of the advice relationship. The CTA research suggests that ‘client care’ are the skills needed to:
- understand the client and identify their needs, objectives and relevant circumstances;
- communicate well with the client;
- explain the advice process in a way that the client can understand; and
- ensuring the client understands, and legitimately consents, to the advice they receive.
On paper these are such simple requirements but, in reality, they are often very hard to demonstrate. Especially when you are dealing with a client reluctant to learn, or one that has unrealistic expectations.
The research further suggested that an adviser should have an awareness of behavioural economics. Advisers need to be aware of potential behavioural biases (both in themselves and in their clients), and to offset the negative effects of these biases, as best they can, by implementing appropriate strategies. This needs to be recognised as both an international trend and as a specific focus of the Australian Government and their Behavioural Economics Team.
download “THE BEHAVIORAL ECONOMICS GUIDE 2018”
ASIC isn’t the only regulator to find that expert advisers consider that an important part of their role is managing the expectations of their clients. This might mean, for example, helping the client understand that their expected cash flow in retirement would not be enough to fund their desired retirement lifestyle. Most advisers understand the issuers, but fewer demonstrate the willingness to address them as part of their relationship (especially where they are tangential or ‘out of scope’). Advisers in the CTA research, on the other hand, described these as ‘tough but important conversations’ and integral to providing personal advice.
If you are interested in developing or enhancing your competency in relation to Client Care and Practice, check out our course catalogue, where you can find various courses relating to:
- Best Interests and Better Advice
- Delivering Customer Needs with a focus on behavioural biases and their influence on advice
- Building Rapport and Managing effective relationships which includes a behavioural diagnostic
- Customer complaints and conflict resolution
- Clear, concise and effective presentations
Identifying CPD needs
Some Licensees embrace generic content as a means of meeting their CPD requirements. The better Licensees do it somewhat differently.
For example, leading businesses use their data (and particularly their compliance data) to structure their CPD programme. This is where the regtech compliance platform, OpenAFSL, comes into its own.
When we run a professional development session with our Licensees, we start with looking at their live advice profile relative to their peers and the industry more broadly. A licensee advice profile is based on the results of advice reviews we conduct, which gives us an insight into where an adviser needs to focus their professional development attention.
For example, a licensee advice profile may show a weakness in the client discovery phase. Licensee data through OpenAFSL lets us start with relevant data to both inform, customise and target problem areas. It also allows us to track over time, monitor uplift and inform coaching and embedding activities.
Reflecting on the Australian Qualifications Standards, this type of activity goes to the heart of developing competency, and delivers solutions that are both effective and compliant.