Whether you like him or not, Charlie Teo is a skilled neurosurgeon. But for a range of reasons, he’s defending himself against complaints brought by the families of former patients.
Reading the coverage of the proceedings, a lot of focus was placed on what Teo says he did or didn’t say to his patients and their families. More importantly from the perspective of how it plays out in public, there was a focus on what the families say they understood about what was going to happen, and on what they recall about what Teo did or didn’t tell them.
It was striking from the reporting just how much potential there is for recollections of a shared experience to diverge. This is especially true when one party to the event is an expert, and the other party is unskilled or unknowledgeable in the issues being discussed.
Similar though significantly less serious situations can arise in financial advice, and it underlines the case for why advisers should keep detailed and contemporaneous file notes, and why they should regularly check that clients grasp the advice they are being given.
File notes are likely to taken on even greater importance as moves are made to simplify the Statement of Advice, and as that document moves away from being the be-all and end-all of the advice provided to an individual to a succinct and user-friendly summary.
File notes and other correspondence between adviser and client also form part of the advice provided, and bear on the client’s understanding of what the advice is and what it is designed to help them achieve.
Looking past the SOA
It’s already the case the what AFCA is asked to make a determination in a dispute brought by a client against an adviser, it looks past the SOA as far as it can into the totality of an adviser’s communications and interactions with a client.
At the Professional Planner Advice Practitioner Summit in Sydney in February, AFCA advice ombudsman Shail Singh said the authority generally takes into consideration a lot more than just an SOA when determining whether advice provided was appropriate to the individual complaining about it, and whether the adviser is at fault.
“We’ve always looked towards the file notes, we talk about that a lot, the records of all the conversations that happened,” Singh said in February.
“Often disputes come to us because someone complains about losing money, and they don’t really, fully understand all the steps that have led to that.”
Singh noted often those complaints are simply related to poor investment performance, but the authority has to consider all the steps the adviser had taken.
“Documentation is so important, both in terms of file notes, but in terms of easy-to-read SOAs and I really should be clear on that, I mean, easy-to-read ones – I think the longer ones often don’t really help,” Singh said.
“Sometimes you have to look to the other documentation to understand whether, for example, informed consent was given to a particular strategy.”
It’s not brain surgery
Financial advisers are not in the business of saving lives in anything like the way Charlie Teo is, but in its own way financial advice can be life-changing, and when it goes badly wrong it can cause deep and lasting damage to an individual’s quality of life and living standards.
Clients bring disputes against advisers often because they have been misled or simply failed to fully understand the advice they have been given. Relying on an 80- or 100-page document – one largely designed by lawyers and well-meaning but misguided compliance people – has always been a dubious way of ensuring a client understands the advice they’ve been given.
But it’s also not enough to rely on often divergent recollections of conversations to piece together whether informed consent could have been given.
Somewhere between the two extremes, file notes are a critical way of recording the development of the relationship between an adviser and a client, the appropriateness of the advice provide, and the client’s understanding of it.
* This article was edited on 3/4/23 to clarify that Charlie Teo is defending himself at a disciplinary hearing against complaints from the families of former patients.
