“I believe in evidence,
Where’re you from?
You sexy thing”
— Hot Chocolate
Standard 8: Record-Keeping
“Ensure your records of clients, including former clients, are kept in a form that is complete and accurate.”
Code of Ethics Standard 8: Complete and Accurate Record-Keeping
FASEA Standard 8 mandates that you maintain your client files and records in a complete and accurate form. This standard is straightforward in its intent and, in my opinion, one of the most crucial. The reason being, it’s challenging to prove you’ve met your duties and obligations, as well as the FASEA Standards, if your files are incomplete.
Whether your advice files are under internal or external review by an independent party, the process will involve a retrospective examination of the file, with the outcome determined by its contents. Evidence of meeting relevant duties and obligations and acting in the client’s best interest will be sought. If it’s not found, then it didn’t happen.
While the Royal Commission represents a worst-case scenario, the principle remains the same when anyone requests information. This could be a client, colleague, licensee, solicitor, AFCA, or ASIC. In financial services, it’s best to “hope for the best but plan for the worst.”
“A Royal Commission has broad powers to gather information to assist with its inquiry, including the power to summon witnesses and request documents as evidence.”
Record-Keeping: A Digital Age
Vinyl records may prefer low temperatures and low humidity, but what about advice files? Years ago, I would have said the same about manila folders containing client files. Fortunately, most advisers have transitioned from paper to digital storage.
Regrettably, most music aficionados have also moved from vinyl to digital collections, but that’s a topic for another day. Records must be kept for seven years (ASIC CO 14/923), and the method is your choice. However, ask yourself honestly if you or someone else could quickly locate a specific document for a client, your licensee, or even ASIC. If the answer is no, perhaps it’s time for a change.
Start by ensuring all client interactions are stored in the file and appropriately categorised and linked to relevant advice. This may require transferring information from your phone, email, and other sources, but the long-term benefits are worth it.
The Importance of File Notes
Advisers wear many hats when interacting with clients. They often have access to sensitive information about their clients’ circumstances, which isn’t always market or portfolio-related. While it’s crucial to protect your clients and adhere to privacy obligations, recording key conversations is vital.
Some advisers avoid recording sensitive conversations to protect their clients. While this is a prudent approach, it’s not always the best one. If the information provided leads to a change in advice, there needs to be a record. You can choose to redact sensitive information or be less detailed in some areas, but a recording must exist.
File notes aren’t legally required but offer immense value, especially when high-quality and detailed. They preserve interactions and provide a traceable path for anyone to follow. Time constraints can be a challenge, but a well-documented file note is invaluable.
The Interconnected Web of FASEA Standards
Standard 8 is intrinsically linked to all other FASEA Standards. This requires retaining evidence within the file that you’ve not only met the Code but can support that belief. Paper files are now rare, and digital options abound. If information is on file, it’s easier to assume it’s been considered. If it’s not, there’s a greater risk of someone reaching a different conclusion.
You need to evidence that you’ve acted in accordance with applicable laws, including the Code, and did not attempt to avoid or circumvent their intent (Standard 1), acted with integrity and in the client’s best interest (Standard 2), disclosed any conflicts and did not act (Standard 3), and so on through Standard 10.
For example, this means maintaining records that demonstrate that you:
- Acted in accordance with applicable laws, including the Code, and did not attempt to avoid or circumvent their intent (Standard 1)
- Acted with integrity and in the client’s best interest (Standard 2)
- Disclosed any conflicts and did not act (Standard 3)
- Obtained the client’s free, prior and informed consent for you to act for them (Standard 4)
- Provided appropriate advice which was in the best interest of your client and confirmed the client understood the benefits, costs and risks of the advice (Standard 5)
- Considered the client’s broader, long-term interests and likely circumstances (Standard 6)
- Obtained the client’s free, prior and informed consent for all benefits received by you and your principal, and charged fees that are reasonable and provide value for money (Standard 7)
- Recommended products in good faith competently, and did not try to mislead or deceive the client in doing so (Standard 9)
- Applied your relevant knowledge and skill (Standard 10)
I appreciate the time it takes to compile advice. If you encounter challenges, consult your licensee or us for assistance.