Advice documentation a major exam problem area

Knowledge on advice documentation has been the biggest recurring problem area with the Financial Adviser Standards and Ethics Authority (FASEA) exam. 

Since the results of the June 2020 exam, FASEA had published the problem areas advisers struggled with. 

In the last four exams, advisers had difficulties demonstrating knowledge of the components of key advice documentation that was provided to the client. 

This included financial services guides (FSG), statements of advice (SoA), record of advice (RoA), product disclosure statements (PDS) and fee disclosure statements (FDS). 

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Joel Ronchi, myIntegrity in Practice principal consultant, said advisers might not be as prepared on the legal aspects of documentation, as they were more used to viewing it from a practitioner’s perspective. 

“Based on my interactions with people who do our [exam preparation] programs, advisers – rightly so – take the FSG and SOA for granted because they do it day in/day out,” Ronchi said. 

“I say to people that do our program to ‘read your FSG, go through it back to front, cross reference it against section 941 and 942 of the Corporations Act, and understand why the information in the FSG is the way it is’. 

“But advisers, because they do it day in/day out go in thinking they know it back-to-front, which they probably do from a practitioner’s perspective, but not from a legal perspective.” 

Ronchi said the challenge advisers had with the exam was it tested the application of the law to a hypothetical scenario. 

“More often than not the hypothetical scenario given in the exam is one most advisers would have never come across because it’s just so out of left field and not what they do day-to-day that it just doesn’t make sense,” Ronchi said. 

“It’s not about the quality of the documentation at all, but understanding what the letter of the law is in relation to how these are to be used and structured under the Corporations Act.” 

Other recurring issues were: 

• Demonstrating an understanding of different types of advice (e.g. personal advice, general advice and factual information) and how they applied to different client scenarios, which was an issue in the January 2021 and November 2020 exams; and  
• Demonstrating an understanding of an adviser’s ethical obligations when advising on complex family structures, which was an issue in the November and August 2020 exams. 

The results of the January exam was the lowest thus far with only a 67% pass rate, much lower than the 78% average across all exams. 

There were only five more sittings for 2021 and existing advisers were expected to pass the exam by the end of the year. 

Advisers could only sit every second exam and registrations for the March exams had closed.