Best interests duty starts on 1 July 2013. There’s more to it than appears at a first glance. Here’s some guidance on getting ready….
It’s tempting to think that there’s not much to do, because after all you already act in your client’s best interests, when giving personal advice don’t you? You also provide appropriate advice, prioritise the client’s interests and warn the client if the advice is based on incomplete or inadequate information.
Do you?
But here’s 7 things you’ll need to do – especially if you’re an AFS licensee:
- Fact Find – could it benefit from a rework to remind advisers of the safe harbour steps when collecting information and scoping the client’s needs?
- Advice Process – you’ll need to add guidance on and a requirement to act in the client’s best interests, including how advisers can navigate their way into the ‘safe harbour’.
- APL – is it broad enough? And review your procedures for advising on products that aren’t on the APL. Advisers are now expected to do this, and you’ll need to control it.
- SoA – amend your template to include information about why the client will be in a better position as a result of the advice.
- Train – train your advisers on all of the above – don’t just send it out to them and expect them to understand and comply!
- Monitoring – update your monitoring and supervision checklists to add the obligation to act in the client’s best interests.
- PI Insurance – check your PI to see what cover it provides for products that aren’t on your APL. You might need to renegotiate with your insurer.
Here’s some other things to think about:
- One-size-fits all – Does your advice model lead to one-size-fits all outcomes for clients? If it does, even if you genuinely believe this is in the clients’ interests, ASIC is likely to come looking for you.
- Switching – going forward, switching will only be acceptable if it’s reasonable to conclude that the net benefits likely to result from the new product are better than the existing product. Remember overall cost savings can override the loss of other benefits – but you must take into account switching and adviser’s fees.
- Priority – think carefully about whether your advice process prefers your interests to your clients. You may not be the best person to judge this. Get a second opinion.
- Over servicing – don’t recommend a product or over service the client to create extra revenue. ASIC will see through this one too. And your clients won’t thank you for it. Good clients know value when they see it.
