When should an adviser use an ROA?

After an adviser received a warning from the FSCP about their Record of Advice usage, when is the correct time for it to be used with clients?

Earlier this week, the Financial Services and Credit Panel (FSCP) issued a warning to an adviser who failed to provide a Statement of Advice (SOA) when providing personal advice to a retail client, instead they provided a Record of Advice (ROA). 

“The circumstances of the contravention were that between February 2022 and November 2022, the relevant provider gave Records of Advice to clients in reliance on Statements of Advice that had been given to the clients by a different providing entity,” the panel stated. 

ASIC describes an ROA as a simple record that confirms the advice provided by an advice licensee or an adviser, shorter and less formal than an SOA. It is often given to existing clients to confirm changes to, or implementation of, advice that has been provided in a previous SOA.

It can be provided in written, video or audio content, so long as it is presented in a way that is easy for the client to access and digest. 

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As a minimum, the ROA will need to cover the recommendations, and the basis for the recommendations (i.e. the adviser’s reasoning). It must also give the clients information about any potential conflicts.

An Australian financial services licensee should ensure that ROAs are kept for a period of at least seven years after the day the personal advice is provided to the client. They must also keep records of the information relied on, to demonstrate that they have prioritised the client’s interests when giving personal advice.

The three scenarios when an ROA can be used instead of an SOA are for:

Further advice

You give further advice to the client and;

• You have previously given the client an SOA setting out the client’s relevant circumstances in relation to the advice (the “previous advice”).
• The client’s relevant circumstances in relation to the further advice are not significantly different from when the client received the previous advice.
• To the extent the further advice is based on matters other than the relevant circumstances of the client – the basis on which the further advice is given is not significantly different from the basis on which the previous advice was given.     

No buy or sell product advice          

You give advice that does not recommend, or state an opinion about, the acquisition or disposal of a specific financial product, and does not recommend a modification to an investment strategy or a contribution level for a financial product held by the client, and; 

• You and certain associates do not receive any remuneration or benefit in relation to the advice.
• You provide information about potential conflicts in your advice to the client.         

Small investment advice        

You give advice that relates to financial investments in certain products not exceeding $15,000.  

An ROA only needs to be provided if the client requests it in the first two cases but needs to be provided "as soon as practicable" in the final scenario.                

ASIC also clarified, when giving further advice, what constitutes a client’s relevant circumstances as being “significantly different”. In this scenario, the adviser cannot use an ROA and must give the client an SOA instead. 

This can include:

• A new mortgage
• Divorce or separation
• A new baby
• Redundancy or job loss
• Inheritance
• Sale of business
• Death of a partner 

Another example of when an SOA is needed rather than an ROA is if the further advice is significantly different to the basis on which the previous advice was given. This would apply, for example, if the adviser previously gave advice on superannuation and insurance, and then gave further advice on personal investments, or if they gave advice on investing in ETFs and then gave the individual further advice on superannuation. 

The records contained in the client’s file should show the inquiries made by an adviser and demonstrate whether the client’s circumstances are significantly different.