Lawyer Warns About New Record Keeping Requirements

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New record keeping requirements that relate to the best interests duty may have gone unnoticed by advisers and licensees, one financial services legal expert has warned.

The Fold Legal's Sonia Cruz
The Fold Legal’s Sonia Cruz

In September, ASIC issued a class order (CO 14/923) that imposes specific record keeping obligations on licensees in relation to the best interests duty and related obligations. The new obligations, which take effect from 23 March 2015, require financial advice providers to keep detailed records that demonstrate how they have met the best interests duty when providing advice to a retail client.

According to the Fold Legal’s Senior Compliance Consultant, Sonia Cruz, advisers will be required to keep records of the information they relied upon, the actions they took, the advice they gave to the client and how this was in the best interests of the client. If the adviser relied on the best interests ‘safe harbour’ criteria to meet their obligations, Ms Cruz said they will also be required to document these steps. Records must be kept for a period of seven years.

Ms Cruz also emphasised the importance of documenting conflicts of interest.

“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 said.

Advisers need to be taking detailed file notes at all stages of the advice process

Ms Cruz warned licensees to start reviewing the way their advisers collect and retain information when advising clients, in preparation for the commencement of the new record keeping obligations.

“Advisers and licensees need to be looking at the ways they are using fact finds, customer relationship systems or other information collection documents,” Ms Cruz said. “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 added that 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 said.



3 COMMENTS

  1. Much, if not all of this, is driven by the litigious society in which we live in. Personal responsibility doesn’t figure as prominently here as it would in other areas because clients as a whole don’t know a lot about our industry, products and advice. Even so, we don’t need any more back-office magnifying-glass tick-boxes, surely.

    Our industry is already top-heavy with complexity, best-interest duty and compliance, not to mention over-the-top, almost-weekly government scrutiny.

    How much longer will it be before it gets to the point where we’re spending 80% of our time in looking over our collective shoulders instead of getting on with the business of addressing the rank underinsurance issue in our country?

    • Couldn’t agree more Paul. A person can visit a medical specialist who gives them verbal advice that, literally, their very life may depend on. And what’s required by the specialist. A few brief notes in a file and a summary letter to the clients GP. The file is usually back in the cabinet before the clients paid the bill. But for me to help someone invest $5k for their kids future, a CDF, ID processes, an SOA, file notes, Fee Disclosure documents etc etc… What is wrong with this picture?

      • What’s wrong with the picture is that our process is built on the idea that we will be paid by the product. We need to completely separate advice from product AND seek major compliance concessions to make advice affordable.
        I would ditch life insurance commissions tomorrow if I didn’t need to do anything beyond a diary note and an application.

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