FMA feedback: major focus on record-keeping and replacement advice process

The FMA has written back to some of the advisers that have been interviewed. Most advisers in the process will have something to improve upon – that doesn't surprise us as our interaction with advisers suggest that we are going through a step-change in how advisers approach record-keeping and written documentation of their advice processes. Or put another way – those things have been poor in the past and many insurance advisers have been improving them a lot recently. Some of the issues the FMA has highlighted include: 

  • Keeping good files. That one can be an RFA and not keep advice files is probably a good criticism of the current law. 
  • Fact-finds. Fact finds may be conducted in a number of ways, but however you do it, you need retain evidence of it and at least some consistency of practice.
  • Client first. Although RFAs are not bound by the AFA Code, clearly putting the interests of the client first should be your concern. Clearly demonstrating that is central to advice, keeping clear records makes for a strong defence years later.
  • Comparison. When advising on replacement the FMAs current guidance (find it here) is clear: you either need to warn that you aren't doing a comparison, or prepare a good side-by-side comparison including strengths and weaknesses and details of any stand-down periods, if applicable. 

We get a lot more inquiries from advisers about how to improve their compliance processes, and how to make our research reports part of them. So much so, that we are now working with compliance consulting partners – Barry Read at IDS is our first suggestion for advisers – to help you create a seamless process from initial disclosure to completed report document. 

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