“Maybe sometimes we got it wrong, but it’s all right
The more things seems to change, the more they stay the same
Ooh, don’t you hesitate
Girl, put your records on”
— Corinne Bailey Rae, “Put your records on”
Re-examining Records of Advice
If you’re drowning in paperwork or frustrated by the bureaucratic burdens that get in the way of providing ongoing advice, you have to read INFO 266.
Published by ASIC in Nov 2021, it provides updated guidance about using Records of Advice (“RoAs”) and addresses the “obligations that apply to a providing entity when providing personal advice to retail clients”.
While it’s not perfect, it’s clear and accessible.
In summary, INFO 266 provides details about preparing, using and keeping RoAs, and the meaning of “significantly different” in the context of changes to a client’s relevant circumstances from when the original advice was provided. It also addresses other matters such as how long a Statement of Advice (“SoA”) retains currency for, when an RoA needs to be issued following a change of licensee, when an RoA is not required, and how ASIC will review files containing RoAs.
Better yet, ASIC provide three practical examples to consider:
- Attachment 1 is an example RoA for retaining and modifying existing products. In the case study provided, the advice relates to superannuation and insurance;
- Attachment 2 is an example RoA for providing a “no change” recommendation. In the case study, the advice relates to a clients’ existing account based pension; and
- Attachment 3 is an example RoA for an adviser providing advice in a stockbroking context.
Why you need to read it
Reading INFO 266 and the attachments will save you time – loads of time – in the long run, because it will help you avoid “over-shooting” or “under-shooting” the mark. Some of the information in INFO 266 will be familiar to many, but there are also new and important key messages:
- ASIC has explicitly and clearly integrated a consideration of the FASEA Code of Ethics into the example RoAs:
- FASEA has confirmed the examples are consistent with their requirements;
- The example RoAs clearly outline ASIC’s expectations with regards to record-keeping for RoAs and the associated client file;
- The requirement to obtain written consent for fees (as per the new rules outlined in INFO 256) is also specifically referenced.
INFO 266 highlights key concerns and issues that we’ve often identified including:
- RoAs linking back to an old SoA and asserting that there has been “no significant change” in a clients’ relevant circumstances despite clear indications to the contrary:
- INFO 266 provides further guidance about when and why this practice is not appropriate;
- Advisers declining to conduct, and retain, basic comparison and verification research when recommending the retention of current products.
- Many advisers believe this only applies when preparing SoAs, but Attachments 1 and 2 indicate this is not the case;
- Advisers declining to consider, and address, the ongoing impact of funding insurance premiums through superannuation. ASIC have repeatedly highlighted (e.g. in LIF 413 and RG 90) the need to do so when providing an SoA:
- Attachment 1 continues this theme and specifically highlights the need to address the issue when preparing a Record of Advice (and not just an SoA);
- Many advisers discuss the intended beneficiary for life insurance policies with clients, but do not document this discussion on file:
- Attachment 1 highlights the importance of a documented discussion about estate planning and beneficiaries;
- Many advisers’ RoAs refer to an SoA that did not address the subject, or subject matter, of the subsequent advice. For example, using an RoA for investment advice where the foundational SoA only addressed insurance.
Dealing with Complexity
The example RoAs in Attachments 1, 2 & 3 deal with relatively simple and straightforward advice contexts.
The use of RoAs can become more challenging when there are multiple SoAs that are still “current”, where the recommended strategies are complex, or where there are multiple entities in a client group.
INFO 266 doesn’t provide a prescriptive recommendation for how to deal with multiple RoAs pointing back to multiple SoAs and the reality is that you must:
- Think about how, and when, you use Records of Advice;
- Recognise that a variety of documents may define or re-define the scope of advice. For example, Terms of Engagement and Ongoing Service Agreements, as well as subsequent SoAs and RoAs can change the basis of the initial advice;
- Anticipate that one RoA can potentially refer to more than one SoA; and
- Contemplate generating more than one RoA following the provision of further advice, particularly where there are multiple entities or there are multiple current SoAs.