How to avoid Ombudsman action: 10 top tips

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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

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  • Rod on 28/11/2013 3:36:15 PM

    Our dealer group can actually provide an SOA for a client wanting advice on a SMSF with all aspects covered in plain understandable english and yes it is done in Eight pages.

  • GAB on 28/11/2012 12:14:15 PM

    Remember, risk profiling tools are only tools. They all have inherent flaws that must be recognised and addressed by the adviser.....and what excatly would those flaws be...hmmmm FOS? You tell us.

  • david m on 28/11/2012 12:05:48 PM

    All this in 2-7 pages? I love it. Between the disclosure ASIC want the info FOS want.. and they have the gall to go around the country spuiking 7 page SOA's? What size font?

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