Disclaimer
This guide is provided on the basis that you confirm each guideline with your licensee before proceeding with producing Record of Advice documents.
By reading the below guide, you confirm that acknowledge the general nature of this information.
By reading the below guide, you confirm that acknowledge the general nature of this information.
The below information is provided to assist you in completing a Record of Advice.
The key to determining whether an RoA can be used is to ascertain whether there has been any significant change to the:
The key to determining whether an RoA can be used is to ascertain whether there has been any significant change to the:
- client’s objectives and financial situation and needs; or
- basis for the advice the adviser is providing or the client is requesting.
Examples of Significant ChangeThe following are examples of likely “significant change” – therefore a Statement of Advice will be required.
Some examples of likely significant change in a client’s personal circumstances are:
Some examples of likely significant change in the basis of advice are:
- the further advice relates to gearing outside of superannuation and the previous Advice Document related to accumulation of investments inside superannuation; or - the further advice relates to the client drawing an income in retirement and the previous Advice Document related to superannuation in the accumulation phase.
- the further advice recommends certain life insurance products and the appropriate level of cover for the client, whereas the previous Advice Document focused on managed investment products and life insurance was only discussed generally in terms of the benefits of obtaining such insurance. |
Examples of Possible Non-Significant ChangesThe following are examples of advice scenarios where change may not be significant – in which event an ROA may be appropriate. However, advisers must consider for each client if there has been any “significant change” to the client’s relevant personal circumstances or to the basis of the advice.
1. Additional Contributions – Lump Sum Where the further advice relates to an additional lump sum contribution of up to 20% of the client’s total investment portfolio, there may not be a significant change in the client’s relevant personal circumstances. If however, the advice to contribute the additional amount results from a change in tax legislation, there may be a significant change in the basis of advice, even though the additional contribution is in itself relatively small. Please note this concept needs to be applied to all the examples below. For example, the adviser must not only consider the change to the client’s personal circumstances in isolation. Even where there has been no change or no significant change to the client’s personal circumstances relevant to the advice - what has led the client to obtain advice or the adviser to initiate the advice might be significant. 2. Asset Allocation & Risk Tolerance Change Where the further advice relates to one of the following there may not be a significant change in the client’s relevant personal circumstances or to the basis of advice.
3.Switching Investment Options within a Platform Where the further advice relates to switching between investment options which are similar in terms of features and risk/return characteristics (such as from one Australian share fund to another within the same investment platform), there may not be a significant change in the basis for the advice. If however, the advice relates to switching between different investment options (within the same investment platform) with different features and risk/return characteristics - such as switching from a traditional managed fund to a hedge fund – there may be a significant change in the basis of the advice. Note: If the advice relates to switching platforms/administration services, an ROA cannot be used, regardless of whether or not there is a significant change to the client’s circumstances or the basis of advice. |
Guide to completing a Record of Advice (RoA) - 10 points to considerThe RoA must include:
1. Client DetailsDocument the clients name and the Advice Document which this further advice relates to.
2. Client CircumstancesDetermine the changes to the client’s relevant circumstances. These changes need to be documented in the RoA to make it evident that they are not significant having regard to the examples and table above. This should in most circumstances, be updated prior to the further advice.
For advice provided in writing, the advice may be able to rely on the ‘assumed no significant change to circumstances’ provision. 3. Basis of AdviceDocument the reason for the advice and whether this has been initiated by the client or the adviser. Determine whether these are significant compared to the reasons the previous was sought. These changes need to be documented to demonstrate that the change is not significant.
4. Details of Advice ProvidedDetail the advice that was provided to the client:
- Any refinements to the strategy; and - Why this was appropriate to the client 5. Costs & RisksRedeeming/Replacing
If switching investment options within a platform or selling listed securities and replacing them with other listed securities, summarise what the client was told in terms of:
This section should also detail any costs and risk associated with the product recommendations or refinements to the strategy. Also ensure that the PDS name and preparation date is included where relevant. If the client doesn't have the most recent version of the PDS, ensure you provide the current version. 6. WarningsWhere the advice is provided in writing, the appropriate warnings need to be inserted into the RoA.
Where the advice is provided verbally, tick the appropriate box where you have given details of warnings communicated to the client.
7. Disclosure of Fees & AssociationsWhere the advice is provided in writing, the appropriate warnings need to be inserted into the RoA.
Where the advice is provided verbally, tick the relevant fee box AND summarise in the space provided what was communicated to the client for each of the area’s ticked. Ensure where possible that these are stated in % and $ terms. Where it is not possible to disclose in $ terms then you must provide the client with worked dollar examples. Any associations or conflicts of interest relevant to the product recommended must be disclosed. Please note – Unless using an RoA for the formal review, only the fees/commission/associations relating to the further advice need to be disclosed in the RoA. If using an RoA at a formal review, you should use the RoA as the opportunity to disclose the existing ongoing fees/commissions. 8. ConsentYou must confirm on the RoA that the client has consented to the implementation of the advice. Where the client wants to proceed with amendments to your advice this must be clearly noted on the RoA.
Consent to proceed can be received by the adviser in any of the following ways:
9. Other ItemsEnsure that the RoA is signed and dated by the adviser. Ensure that they have the most current version of your FCSG and record on RoA accordingly.
Where the advice is provided verbally;
10. Supporting MaterialIf applicable, attach copies of any information sent to the client relating to the recommendations. For example, Client letters, research reports, assumptions/projections and generic information relevant to the recommendations.
The RoA includes a notes section where you can add further information or details of the discussion held with the client that may be relevant to the advice. |