Staying on the right side of the best-interests duty requires advisers to keep a trail of paperwork that proves they completed thorough fact-finding, compared strategies, managed conflicts and exhausted all other optimal solutions, a forum has heard.
While a strategy may appear to be in a client’s best interests, it is the evidence that will prevent advisers from receiving a personal fine of up to a few hundred thousand dollars, adviser Tony Sandercock of wetalkmoney said.
“If the majority of reasonable advisers believe it meets best-interests duty, it probably does,” he said.
Lisa Weissel, of MiQ Private Wealth, said the only protection advisers have at a time the Australian Securities and Investments Commission is heavily cracking down on breaches is to offer compelling reasoning that they considered all appropriate options for their client and deemed their chosen path the best one.
“Best-interest duty is [whether you can] prove it,” she said. “If you can’t prove it, that’s how you get caught out.”
Advisers in the session were presented with four case studies and asked how they would prove strategies were in the client’s best interests.
One of the cases involved changing licensees and discovering the main platform you have used in the past is no longer on your approved product list. The business development manager in this scenario recommends writing all new SoAs to clients and moving them to the new APL; however, in this case, the adviser discovers it is not in the best interests of some of the clients.
One of the forum’s participants made the point that it would be difficult to prove to the regulator that an older client would need constant product updates and text messages simply because your licensee requires it.
Weissel said a good licensee would accept that products should meet all clients’ best interests and expand the APL if necessary.
Advisers were told thorough record-keeping includes notes on how you have satisfied best-interests duty, the reasons why the advice is appropriate, how conflicts have been managed and how the information has been relayed to the client (a summary of verbal discussions).