Whether you have an upcoming FMA audit, or are reviewing compliance processes within your business - you may have questions like:
What evidence is required at each stage of advice?
What sort of material would be considered sufficient evidence?
We'll be answering these questions below - so you can be sure of what evidence you need for each step of advice and how you can gather this!
For members of Kiwi Adviser Network - find out more about how to use the compliance evidencing features available to you in Trail by clicking here!
In this article you will learn:
6 Steps of Advice: What evidence is required & why?
What is considered sufficient evidence when I am under audit?
Evidencing the 6 Steps of Advice
Here, we will provide detailed explanations of the evidence required for each of the 6 steps of advice, along with the purpose of this evidence.
This section is aimed to give you insight into how the regulations are meant to ensure an industry standard of quality financial advice for your clients.
1. Establishing the Relationship
Evidence Required
Client Engagement - Nature & Scope of Advice Letters: Describe your services, fees, client relationship terms, and any of your advice limits. Ensure clients understand your N&S and agree to proceed. Email r proof of verbal confirmation is required.
Disclosure Documents: You are required to disclose your qualifications, services, fees, and any conflicts of interest.
Records of Initial Meetings: Detailed notes from your first meetings with the client, capturing key points of discussion.
Purpose
This step ensures transparency, a clear understanding of the clients' goals and needs and the start of a trust-based relationship with the client.
2. Gathering Client Data
Evidence Required
Detailed Client Fact Finds: Comprehensive information about the client’s financial situation, including assets, liabilities, income, expenses, and financial goals.
Risk Profile Questionnaires: Assesses the client’s risk tolerance, investment preferences, and financial knowledge. (Investment advisers)
Records of Client Interviews: Notes or transcripts from client conversations, capturing their responses and insights.
Purpose
The step is to collect accurate and detailed client information to provide well-informed and tailored advice.
3. Analyzing and Evaluating the Client’s Financial Status
Evidence Required
Financial Analysis Reports: Detailed assessment of the client’s financial situation.
Risk Assessments: Evaluate potential risks to the client, including market, credit, and personal risks.
Product and Provider suitability: Research the best options that align with client goals.
Documentation of Assumptions Used: Record any assumptions made during analysis.
Purpose
This step identifes your client's financial strengths and weaknesses to form a basis for your recommendations.
4. Developing and Presenting Recommendations
Evidence Required
Written Financial Plans: Comprehensive Statement of Advice that outlines your recommendations, specific actions to take for your client, and expected outcomes.
Product and Provider Comparisons: Compare different financial products to show how each meets the client’s needs and objectives.
Recommendation Summaries: Clear summaries of your advice, highlighting key points and your advice rationale, including risks and benefits.
Purpose
This step is to provide clear and well-documented recommendations to help clients understand and trust your tailored advice.
5. Implementing the Recommendations
Evidence Required
Records of Transactions: Detailed notes of verbal discussions or emails with clients.
Implementation Plans: Step-by-step plans for putting recommendations into action, including timelines and responsibilities.
Consent: Signed forms, email confirmations, or transcripts where the client authorizes you to implement agreed-upon recommendations.
Purpose
This step is to ensure proper documentation of implementation; both in following through with the advice given and client authorization of this.
6. Reviewing and Monitoring
Evidence Required
Review Meeting Notes: Detailed notes or emails from periodic review meetings with the clients that capture discussions of their financial plan and any changes in their circumstances.
Updated Client Fact Finds: Revised fact finds reflecting changes in the client’s financial situation or goals.
Purpose
This step is to ensure regular monitoring/reviewing to keep the client’s financial plan on track and make adjustments as needed.
What is Considered Sufficient Evidence?
Bear in mind you can have a mixture of these following forms of evidence for any Step of Advice - as long as you can meet the criteria of the evidence required! 👍
Meeting Notes
Handwritten or Typed Notes: Scanned in or photographs of handwritten notes or direct uploads of typed notes from meetings.
Recorded Conversations
Audio Recordings: Voice recordings of phone calls or in-person meetings, ensuring consent from the client is obtained and documented.
Video Recordings: Video recordings of virtual meetings (e.g., Zoom, Teams), again ensuring client consent is obtained.
Emails and Messages
Email Correspondence: Copies of emails exchanged with clients, including all attachments.
Chat Logs: Transcripts of chat conversations from messaging apps.
Documents and Attachments
Signed Documents: Scanned/photo copies of signed engagement/consent forms, and agreements.
Shared Files: Copies of any documents shared with or received from clients, such as financial statements, fact finds, or risk profiles.
CRM Notes
CRM Entries: Detailed notes entered directly into the CRM after client interactions, including the date, time, and summary of the discussion.
Action Items and Follow-Ups: Entries outlining agreed-upon next steps and follow-up actions.
Forms and Questionnaires
Completed Forms: Scanned or digital copies of completed fact find forms, risk profile questionnaires, and other relevant client documentation.