Read on to gain some valuable insights into these issues and learn how to enhance your compliance practices to optimise your business outcomes.

Key compliance insights:

• Many FAPs have yet to grasp the flexibility of the new advice regime, which fosters innovation and simplicity through suitable technology. You still need to follow the six-step advice process but you can do it in a more engaging way e.g., clients taking the lead by driving the keyboard/screen with advisers serving as coaches and guides rather than sole repositories of knowledge, plus delivering advice documents that are visually appealing and quick and easy to read. 

• There needs to be a stronger focus on record keeping. If the Financial Markets Authority (FMA) asks for client files you should be able to provide these quickly. Anyone in a FAP who is appropriately qualified to handle a client enquiry should be able to go into the file (hopefully electronic) and be up to speed on the client within minutes. If it takes more than a few minutes to recreate the client history and interactions, then the CRM and file storage systems need urgent attention. 

• Disclosure is still being unnecessarily replicated. We are seeing too many FAPs having three stand-alone disclosure documents (publicly available, nature and scope, plus when advice is provided). The disclosure regulations permit progressive disclosure. If you have already disclosed the prescribed information earlier, then you don’t have to disclose it again. This means that by the time you get to the statement of advice, the only things usually needing to the disclosed are the fees/commissions specific to the recommended products plus any specific conflicts of interest.

• Ongoing client servicing is not hitting the mark. Ongoing servicing does not mean you have to meet with a client annually (unless it is part of a contract you entered into with the client). Ongoing servicing is about identifying why the original advice or product was recommended, discovering what has changed with the client’s situation, their goals, the economic market and the product itself. You then need to analyse whether the current advice/product is still suitable based upon any changes which have occurred. To do this job properly, there needs to be good client records to work from. If the client file is lacking detail then it is often hard to determine if the existing advice/products are still suitable.

If you have any questions or need help with the insights mentioned in this article, feel free to reach out to our experienced team. We are here to help and ready to assist you with any compliance issues you may have.