Financial advisers will need to keep additional records proving they’ve complied with the Best Interests Duty when they give personal advice to retail clients after 23 March 2015.
The Fold Legal (The Fold)’s senior compliance consultant, Sonia Cruz, says advisers will be required to keep records of how they acted in a client’s best interests; the advice they gave to the client and any conflicts of interests, for seven years after the advice is provided.
“For best interests, advisers should keep the information they relied on and the actions they took to show that they acted in the best interests of the client,” she says. “If they relied on the ‘safe harbour’ provision, this includes records of all the safe harbour criteria.”
In relation to records of advice, Ms Cruz says the record must demonstrate how the advice was appropriate, and how the Best Interests Duty had been satisfied.
“If the adviser, or anyone associated with them or with their licensee, knew or should have known about a conflict of interest, the information relied on and the actions they took to show that they prioritised the client’s interests over their own interests is also necessary,” she says.
Ms Cruz says the requirements make it clear that the Australian Securities and Investments Commission (ASIC) believes good record keeping systems support the ongoing provision of quality advice to clients, help licensees supervise their representatives and help consumers hold the licensee/advice provider accountable for the quality of their advice.
“To prepare for the new obligations, Australian Financial Services licensees need to review and if necessary improve the way their advisers collect and retain information when advising clients,” she says. “Advisers and licensees need to be looking at the ways they are using fact finds, customer relationship systems or other information collection documents. They also need to be taking detailed file notes at all stages of the advice process, keeping copies of client records and keeping records of the research used to advise clients.”
Ms Cruz says when it comes to paperwork, licensees shouldn’t ‘set and forget’. “Include record keeping checks in your adviser monitoring process, if you haven’t already,” she says.
For more guidance on the Best Interests Duty, see The Fold Legal’s White Paper– Everything You need to Know About Best Interests Duty.
