Stage 3 - Strategy Development

Chapter 7

As a Representative, your primary role is to develop one or more financial strategies to help your client meet their financial needs, goals and objectives.

Conduct a Reasonable Investigation

Elements to consider when you develop strategies for your clients include:

  • Their needs, goals and objectives
  • Their personal circumstances, including their current financial resources
  • Their risk tolerance
  •  Whether their needs, goals and objectives are likely to be satisfied by their current financial strategy
  •  Any legislative or regulatory limitations
  •  The cost of the strategy compared to the expected benefits
  •  For how long the strategy will be useful for the client
  •  Whether the level of complexity of the strategy is appropriate given all the client’s circumstances


ASIC 515 Considerations

 Key Issue  Considerations
Identifying the customer’s relevant circumstances: s961B(2)(b)(ii)

Note: This is a safe harbour step.

As part of identifying the customer’s circumstances that are reasonably considered relevant to the subject matter of the advice sought, a Representative may need to make inquiries that are additional to those they would normally make. This is particularly important if the advice is relatively complex or if it is reasonably apparent that the customer has a low level of financial literacy.

If the subject matter of the advice is revised as part of this process, this should be clear in the customer file and in the SOA, including why the revised subject matter is suitable and in the customer’s best interests.

The customer’s relevant circumstances would normally
encompass any matter that the customer indicates is important.

You must be consider alternative strategies and products for your clients and be able to demonstrate that you have done this in your file notes. A reasonable investigation does not require an investigation into every strategy and product available. However, if a client requests that you consider a specific strategy or financial product, you must investigate that strategy or product.

Modelling software can be a useful tool in the strategy development stage. You should keep the outputs from any modelling, together with any background notes and calculations, in the client’s file.

Affinia's Advice Strategy Matrix

Affinia’s Advice Strategy Matrix is a simple guide to understanding the advice opportunities available to your clients. This interactive guide includes useful links to Affinia’s policies and guidelines, the COPS manual, ATO and Department of Human Services calculators and links. The strategy matrix is based on;

  • Typical advice needs by age band (as per Affinia’s scaled advice scenarios – Chapter 6 Stage 2 of this Hand book)
  • Potential Strategies based on age band and client income levels including:
  1. Cash Flow
  2. Superannuation
  3. Investment
  4. Insurance
  5. Estate Planning
  6. Gearing 
  7. Tax
  8. Government Support/ Social Security
  9. Aged Care

Consult other Professionals

When developing strategies for your clients you may need to consult other professional.

These may include:

  • Accountants
  • Tax agents
  • Lawyers
  • Paraplanners

The Affinia Advice and Research Team are also available to help you. You can reach them at researchtech@affinia.com.au.

Topdocs and Topdocs Legal may be able to assist with the development of some of your client’s strategies in regards to the provision of advice, legal documentation and technical support in the areas of:

  • Estate Planning (personal and Business)
  • Sucession Planning for Companies and Trusts:
  • Corporate Agreements: and
  • Self-Managed Superannuation

Learn more about Topdocs: 

T: 1300 659424 E: support@topdocs.com.au W: https://documentportal.net.au/login/Atrinial

Paraplanning

Paraplanning services can be a useful way to develop financial strategies for your clients. If you use paraplanning services you as the Representative are still responsible for the advice that is provided and you should carefully review and consider any strategies or products before you recommend them to your clients.

The effectiveness of any paraplanning service will depend on how comprehensive
the fact find is.

What will the strategies look like?

A strategy might consist of just one action, it might be a series of actions, or it might be maintaining what the client is already doing.

Identifying Products and services to Recommend

Once you have developed a strategy you should consider whether to recommend particular products or services to help your client follow the strategy.

The Affinia Approved Product List (APL) contains a wide range of products that are preapproved by Affinia for recommendation by Representatives to their clients. In most cases you will be able to meet your duty to conduct a thorough investigation by investigating products on the APL. You should investigate and compare at least three comparable products before selecting the one that you think is best for the client.

If you consider that there are no suitable products on the APL and you would like to recommend a product that is not on the APL you can use the One Off Approval Form to apply for one off approval to recommend a product in a particular circumstance.

You must understand the characteristics, features and benefits and costs of each product that you recommend to your clients, and be able to explain why and how it will help them meet their needs, goals and objectives.

Recommendations to replace a product a client already holds with a different product should include a comparison of the features, benefits, conditions, costs and performance of the new product to the existing product.


ASIC 515 Considerations

 Key Issue Considerations

Other reasonable steps: s961B(2)(g)

Note: this is a safe harbour step

Advisers may need to undertake further steps, if they have not already done so—for example:

  • Explain clearly to the customer the advice that is, and is not, being provided (see Section E of RG 244);
  • When recommending financial products, provide strategic recommendations that benefit the customer; and
  • Offer to provide advice (or refer the customer to someone who can provide advice) on any other key issues identified by the adviser.

Advisers must use their judgement in considering whether there are any other steps that need to be taken to ensure they comply with the best interests duty.

Example: A customer seeks advice on obtaining life insurance only to cover new debt. In the course of providing this advice, the adviser determines that the customer is the single income earner for the customer’s family and has no income protection cover. In this case, the adviser should bring this issue to the attention of the customer and offer to provide advice on this issue.

Will the Strategy Deliver a Measurable and Materially Positive Outcome?

The strategy will not be in the client’s best interests unless it will provide the client with a measurable and materially positive outcome.

If you cannot identify a suitable strategy for your client then you should discuss this with them as soon as possible. In some situations it may be appropriate to revisit the Discovery stage and reconsider the client’s needs, goals and objectives before.

Measurable and materially positive can be defined as:

The benefit of your advice to a client must lead to a material benefit. That is the client needs to be placed in a demonstrably better position.

This can be from a strategy position taking into account your client’s needs, objectives and circumstances.

The benefits to the client of your advice need to be able to be measured in terms of both financial and non-financial metrics. Your advice cannot be based on price alone.

The outcome of your advice must also lead to a clearly measurable benefit.

Where a fee will be charged for your advice and/or implementation and also where there are costs to advice such as exit fees, establishment costs and/or CGT, these costs increase the level of material and measurable benefits the client will need to obtain as a result of your advice.

The Advice Handbook and the Advice process included in the handbook has been designed to assist you to provide compliant, appropriate advice with material and measurably positive client outcomes

ASIC 515 Considerations

Key Issue Considerations

Providing appropriate personal advice: s961G

 A customer file and SOA should together demonstrate that the customer is likely to be in a better position if they follow the advice.

When assessing whether the duty to provide appropriate advice has been complied with, advice reviewers should consider the following:

  • What were the customer’s objectives?

  • Was each objective satisfied by the advice? Why/why not?

  • Which aspects of the advice were appropriate?

  • Which aspects of the advice were not appropriate?

  • Was the customer likely to be in a better position if they followed the advice (see RG 175.224–RG 175.231)?

Deficient switching advice may lead to the adviser failing s961G.

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Presentation

Section Four - Advice Handbook

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