The new regulations around record keeping may sound relatively simple, but according to Anthony Harper partner Nick Summerfield, records is an area where advisers often trip up.
From March 15, 2021, advisers will be required to keep “adequate written records” of their financial advice service, which must demonstrate how they are complying with all the requirements of the new regime. Summerfield says that advisers need to look at the record keeping process both from the client’s perspective and their own, as they will ultimately be their best line of defence if something does go wrong.
“Record keeping is interesting, because it’s the kind of thing advisers will often fall over on,” Summerfield said.
“People will give good advice and then fail on that final hurdle of documenting things properly, and if you can’t document what you’ve done, then that is the point at which issues can start to come up.”
“You can look at record keeping from a client perspective, and also an adviser and compliance perspective,” he explained. “The starting point is probably taking a wider view of records, and thinking about how you provide that to clients in a way that helps them make a decision and understand the pros and cons of the advice, the potential consequences, etc.”
Summerfield says the records also need to demonstrate how advisers are adhering to the standards of “care, diligence and skill,” which should put them in a good position if a complaint is lodged either directly, or through a dispute resolution service.
“Looking at the statement of advice from the adviser’s perspective, you need to be in a position to justify the advice you’ve given and the way you’ve conducted the engagement, so if there’s a complaint either to you or to the FMA, you’re in a position to effectively cover yourself,” Summerfield said.
“It goes beyond just that care, diligence and skill requirement – you should keep records to show you’ve disclosed conflicts of interest, limitations on scope and service, etc.
“I can’t over-emphasise the important good record keeping as a matter of good practice, or as a risk management strategy.”
