Good quality advice could save planners from FOS
With the quality and conduct of the provision of financial advice currently in the spotlight, financial planners should ensure they are providing good quality advice to avoid ending up in front of the Financial Ombudsman Service (FOS), the Fold Legal has advised.
According to the FOS, to provide good quality advice an advisor would have:
- Made reasonable enquiries to understand what their client needed; and
- Made sure their client understood the products or strategy they recommended.
The Fold Legal said that asking plenty of questions, writing down objectives and utilising risk profiling tools could all help understand client needs.
It said that to ensure that clients understand products and strategies, advisers should tell their client in person or on the phone, then confirm that conversation in writing or a statement of advice. The FOS would expect any statement of advice to be tailored to a client’s level of financial literacy.
Failing that, a letter clearly setting out the risks of the product would also be enough, unless the adviser knows the client would be unlikely to read it.
The Fold Legal said that, should a client make a complaint, the FOS could request the following information, so advisers should ensure it is complete and easy to access as a matter of practice:
- The terms of engagement;
- Any financial services guides or product disclosure statements given to the client;
- Any fact finds, needs analyses and research that the adviser completed;
- Correspondence between the adviser and client, including instructions and emails;
- The adviser’s file notes and details of phone conversations; and
- Records of the adviser’s discussions with insurers or other product providers.
AUTHOR
Hannah Wootton
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
