To avoid confusion and to defend your actions should a client complain, Records of Advice should include the context in which information is given to a client and why your recommended products are relevant and suitable for the client.
A complaint was recently lodged with the Ombud for Financial Services by a client who had resigned from work and wished to preserve her pension fund. She further wanted a monthly income. The FSP was asked to provide a Record of Advice, as given to the client at the time the advice was rendered, as well as proof to show the client understood the investment and its terms and conditions.
The advisor provided a generic or pre-populated Record of Advice which, the Ombud’s office contended, related to a living annuity as opposed to the pension preservation fund that was ultimately recommended to the client. The documents did not reflect the correct product; nor did they show the client understood the product or why it was recommended to her.
The Ombud’s response referred to the documents as “confusing,” demonstrating the advisor’s “gross misconduct and/or negligence,” as all product disclosures related to a living annuity. As the FSP failed to maintain a proper Record of Advice that was relevant to the product recommended and requested by the client, the Ombud took the view that the client was “either furnished incorrect advice or that no advice was rendered.” It was recommended that the matter be settled despite the advisor’s commitment to investigate and resolve the issue.
A Record of Advice is a true reflection of the unique and specific advice given to a client. The importance of a proper Record of Advice cannot be stressed enough, as it is the only proof you have of what took place at the time the advice was rendered. The office of the Ombud will not accept any post facto narrative of the events without documents that were completed at the time the advice was given.
To have what is necessary to defend yourself in the face of a client complaint, be sure to keep a complete and accurate Record of Advice.