With the quality and conduct of the provision of financial advice currently in the spotlight, financial planners should ensure they are providing good quality advice to avoid ending up in front of the Financial Ombudsman Service (FOS), the Fold Legal has advised.
According to the FOS, to provide good quality advice an advisor would have:
- Made reasonable enquiries to understand what their client needed; and
- Made sure their client understood the products or strategy they recommended.
The Fold Legal said that asking plenty of questions, writing down objectives and utilising risk profiling tools could all help understand client needs.
It said that to ensure that clients understand products and strategies, advisers should tell their client in person or on the phone, then confirm that conversation in writing or a statement of advice. The FOS would expect any statement of advice to be tailored to a client’s level of financial literacy.
Failing that, a letter clearly setting out the risks of the product would also be enough, unless the adviser knows the client would be unlikely to read it.
The Fold Legal said that, should a client make a complaint, the FOS could request the following information, so advisers should ensure it is complete and easy to access as a matter of practice:
- The terms of engagement;
- Any financial services guides or product disclosure statements given to the client;
- Any fact finds, needs analyses and research that the adviser completed;
- Correspondence between the adviser and client, including instructions and emails;
- The adviser’s file notes and details of phone conversations; and
- Records of the adviser’s discussions with insurers or other product providers.