FPA to define rules of engagement

TheFinancial Planning Association (FPA) is pushing for advisers to sign formal ‘terms of engagement’ agreements with their clients as part of its bid to ease the ongoing professional indemnity insurance crisis.

The plan, part of a guidance paper the FPA is preparing on how advisers should engage with their clients, is expected to be unveiled at the association’s annual conference in November.

The FPA has hired financial planning law specialist Peter Townsend to draft the guidance paper, which will include instructions on what financial planners should incorporate into a standard terms of engagement agreement.

Townsend says the agreements will allow planners to define in writing the exact nature and extent of the advice they are providing in any particular instance, including whether it is part of a comprehensive financial plan or just a more limited piece of financial advice.

He says this will give clients a better understanding of the financial planning process, and also of what they should expect from the advice they receive.

But he says the agreements could also help limit the liability of planners if a client ever files a claim against them.

“We are of the view that the more a client knows and understands of the process of financial planning and what it is that is on offer, the better able they are to give appropriate instructions regarding their investments and the less likely they are to have a crack at the financial planner if things don’t go according to plan,” he says.