6. Use template forms and documents carefully
Make sure template forms and documents about strategies, products and risks are appropriate to the client you are advising.
It is very difficult to convince us that you have selected the right strategies and financial products for a client if the documents contain errors, are missing information or contain copious amounts of irrelevant material.
You will also have some trouble convincing us that the client understood your documents if they contain pro-forma jargon or complex concepts.
Tailor documents to your client’s financial literacy. Statements of Advice (SoAs), for example, must be clear, concise and effective.
7. Use risk profiling tools carefully
Make sure that the strategy and asset allocation you recommend to a client is consistent with risk profile generated by the risk profiling tool you use. If there are inconsistencies, you must clearly explain them.
Remember, risk profiling tools are only tools. They all have inherent flaws that must be recognised and addressed by the adviser.
8. Don't give cookie cutter advice
This is really a reiteration of tips 6 and 7.
You should not put all or most of your clients into the same strategy and products, especially not gearing strategies. For example, FOS saw an SoA for a client with taxable income of $42,000 that stated: 'Your reasonable level of surplus income and high tax rate should make gearing an appropriate option for you'.
9. Understand and explain the products
Understand any products you are recommending. Don’t advise on products you don't understand.
Don't just hand over a product disclosure statement (PDS) – you must explain the PDS to your client and record your discussion in the SoA.
Don't cut and paste PDS disclosures into your SoAs. Show you understand the products by using the same words you use to verbally explain the products to your clients.
10. Be clear about the advice relationship with clients you know
If you are giving advice to a friend, relative, colleague or employee, it is critical to formalise and document the process as you would for any other client.
In addition; declare any conflicts of interest as you would for any other client.
Source: FOS Circular, Issue 10 - Winter 2012
Revealed: The big mistake that incurs Ombudsman wrath