Solving the record keeping problem

Solving the record keeping problem

13 JUN 2022

The Financial Markets Authority (FMA) information sheet outlining record keeping expectations is proving a challenge for those FAPs who never really thought in depth about what Standard Condition 1 for Financial Advice Providers (FAPs) was all about.

Solving the record keeping problem

This is a critical information sheet that all FAP owners, managers and advisers should read. It outlines what the FMA expects to see when they visit your business and ask to see client and company files. The legal basis for needing to comply with record keeping obligations is clear – as are the penalties. The information sheet gives insights as to what client files should contain and provides examples of the sorts of things they look for.

The FMA makes it clear that correct policies, processes and controls are essential if record keeping obligations are to be met. Strategi has extensive experience in building the right record keeping documents and our compliance assurance reviews help identify if a FAP and its advisers are on track with policy compliance.

Helpful tips

Every business will have different records and different advice processes. Strategi can provide standard templates for a few hundred dollars or we can help build a tailor-made solution specifically for your business. Regardless of your situation, the following tips apply to all FAPs:

  • Make sure your starting point is correct by getting your record keeping policy and the advice documents you use externally reviewed by Strategi.
  • Schedule annual training for staff on your record keeping policy, processes and controls. Consider using Strategi’s online education platform Radar which has training modules plus a module on the FMA information sheet.
  • Automate as much as you can to avoid the ‘human factor’ of failing to save documents/emails into the client file .
  • Build record keeping into every position description and set key performance indicators as to what is expected. 
  • Undertake regular checks to ensure all required information relating to a client has been saved into the client file. These checks could be done via sampling a set number of files per adviser each month.
  • Have a checklist as to what is expected to be seen in a client file and ensure the checklist is completed for each task . 
  • In your annual external compliance assurance review include an end to end assessment of your record keeping policies, processes and controls. Checking that:
    • The policies, processes and controls are effective in meeting the record keeping obligations.
    • All staff know the expectations and are they delivering to those expectations.
    • The client files actually contain what they need to contain (via sampling).
  • Record keeping also applies to advice recommendation variations, switches, modifications, rollovers etc. The level of documentation for these smaller activities needs to be to the same standards as the initial piece of advice.
  • The big challenge with record keeping being able to prove that the advice and product the client obtained via the adviser years ago is still suitable today. In many instances there are scant or no decent files available and potentially the ongoing commission payment is not sufficient to cover the cost of putting a client file in place. In these situations, consideration could be given to selling the client revenue stream of low value clients or else introducing some electronic solution. 

If you need help to set up your record keeping policies, processes and controls, or you want to check that what you have in place will meet the requirements of Standard Condition 1 our team can help. Contact us today for a no-obligation chat.