by Ksenia Stepanova 10 Sep 2020
The new Code of Conduct for financial advisers is often described
as “non-prescriptive,” giving advisers free reign over how they choose to
structure and document their advice process – however, according to Financial
Advice New Zealand learning & development manager Andrew Gunn, there are
still important tickboxes that advisers will need to check off.
A key part of the Code is the obligation to “treat clients
fairly,” and to make sure they understand the nature and scope of the offered
advice. Gunn says that this will likely be a “hot area” going forward, as being
able to prove a client’s understanding of your service will be a vital part of
the process.
“If your clients don’t understand the nature and scope of your
advice, you’re not actually being that fair – you’re operating on the basis
that they understand it all without checking,” Gunn said.
“Limitations to advice are all very well, but you have to take reasonable
steps to ensure the client understands them.”
“If you note the elements of the Code, a lot of them are all about
the client,” he continued.
“It’s about treating them with respect, listening to them and
responding – these are all active actions that you can take with your client.
If they get the strong impression that you’re responding and considering their
views, and you’re recording those and documenting them – obviously you’re
demonstrating that you are fair.”
Gunn also urged advisers to pay special attention to Code Standard
1, which emphasises that fairness is “circumstantial” – that is, it depends on
the particular circumstances of each case, and the nature of the advice as it
relates to that circumstance. However, he says fairness is still a “two-way
street”, and one of the most important things for advisers to emphasise is that
they are still responsible for their own financial decisions.
“There’s a final clause in that Code standard which I think is
very important to outline to your clients, and the nicest and gentlest possible
way to say it is that fairness is a two-way street,” Gunn said.
“It doesn’t actually mean that when you make a recommendation,
they aren’t still responsible for the decisions that they make. You can put the
best recommendations and their best interests in front of them in good faith,
but they aren’t necessarily not exposed to risk.”
“Communication is, of course, hugely important,” he added. “You
need to be communicating this to them in a manner that is clear and timely.”
No comments:
Post a Comment