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Financial Planning
- helping people plan their lives, manage their lives and make sure that they can afford a retirement.
- A dynamic process; the design, implementation and maintenance of a set of integrated actions and
transactions which best achieve and maintain financial well-being.
- highly regulated industry
Why study financial planning?
 Financial planning industry is a growing profession about helping people plan their lives
 Can’t offer everyone financial planning
Demand
 It has evolved from industry to profession
 help people find money for their retirement
 from 3 to 40, the growth exponentially is a factor for us to be in demand
Why consider a career in financial planning?
 It is a unique opportunity to help people improve their lives, help them live better today, plan their
future, and finance that
 It is a very rewarding one
 To have the ability to make or to be in that role to make financial advice to others
Any direction between a financial planner and a client

What do financial planners do? (per advice basis)

Life Insurance:
 make sure people are protected from death, critical illness and disability (temporary or permanent).
 Critical part of making a financial advice
Superannuation:
 an organizational pension program created by a company for the benefit of its employees
 Make sure that money is properly allocated
 Need to know the investment appetite of a client:
Aggressive investor = place adequately the funds within that area
Conservative investor = provide advice on which type of investment the client needs to take (money
market, fixed income/interest)
Investments:
 Look at their existing situation, risks and plan the most appropriate strategy
 Most rewarding part of what we do – not just for the growth of the investment, but also reaching the
objective of the client
 Client goals and objectives
 Investment appetite (aggressive or conservative)
Jira – task management system; track both billable and non-billable tasks.
Billable – task that employees do for the client (directly)
Non-Billable – lunch break, internal training (internally for the company, not for the client) (admin category)
TAT – Turn Around Time
 Time given by the client to finish a task
 Amount of time taken to fulfill a request from receiving the task until its completion or sending to the
adviser
TAT – CLIENT – COMMITMENT
TTC – Time To Complete
 Allowable time that we need to complete a certain task
 Total hours allocated for you to complete the task
 Start doing the task up to the completion, not necessarily on submission.
TTC – COMPANY – EFFICIENCY

Intro to Australian Financial Planning Industry

“Failing to plan is planning to fail”
Financial Planning – planning provides the framework to achieve financial goals
Areas of Advice:
 Investment
 Risk Management
 Insurance
 Taxation
 Estate Planning
- It involves the preparation of the documentation required both to enable the efficient distribution
of a person’s assets (and liabilities) when they die, and to provide instructions for surviving
family members as to how they would like their affairs to be managed in the future.
 Social Security
- The social security system in Australia is both a complex and dynamic area with continual
changes to the legislation.
- The social security system is intended to be a safety net for those who cannot provide an
adequate standard of living for themselves.
 Superannuation
 Retirement

Factors that increase demand of Financial Planning

 government policy – which places greater responsibility on the individual for their financial well-being,
and a decrease in government willingness to accept responsibility in the long term
 increase in compulsory superannuation guarantee – All employees are obliged to save for their
retirement and are becoming more informed about the choices available to them.
 ageing population (demographics) – a large percentage of the population is concerned with both
financial and estate planning issues, particularly Australia’s “Baby boomers” as they approach
retirement.
 privatization of Australian companies and floating of shares – has brought thousands of Australian
households into the share market, leading to an increasing awareness and the need for continuing advice
 ever-changing and increasing complexity of government rules – as they apply to taxation, social security
and superannuation.
  fallout from the 2008 – 2009 Global Financial Crisis – has had a massive impact on the savings plans of
many Australians who are facing increasing uncertainty in volatile markets both here and overseas.

2/6/19
Who seeks advice?
The idea of planning for one’s financial future for concerns
Some of them don’t think that they need financial advice
Some are hesitant to seek financial planning:
 they lack confidence on their own ability to understand the complexity of financial issues (fees,
complexity of going through the process)
 they might be given poor advice
Could benefit from access to quality personal or general financial advice and access to factual information
especially at the time of key life events or transitions
Consumers who access financial advice benefit financially as a result of the advice, even after the cost of the
advice is taken into account.
Perception that financial advice is only valuable if they have significant assets to advice upon, advice can be
beneficial for people in a wide variety of financial circumstances.

Financial Planning Statistics: (2010) “Access to Financial Advice in Australia” Report

 The financial advice industry has over 750 adviser groups
 There are over 8000 financial planning practices
 The financial planning industry employs around 18,200 people
 Only 20% - 40% of adult have ever consulted a financial adviser
Financial Advice is provided with a medium to long term view unlike some forms of professional advice
providing benefits that can continue for many years
Long term financial impact of seemingly small financial decisions can be significant
This is why the financial planning industry has traditionally focused on establishing long term adviser/client
relationship

Financial Interest
Financial Literary
 Australians seems more knowledgeable and confident about simple familiar finance topics such as
budgeting, credit, savings and debt
  Less knowledgeable and confident about more complex and unfamiliar topics such as investing,
superannuation and saving for retirement
Factors that influence people’s knowledge and understanding of financial matters
 Attitudes and beliefs about money
 Confidence levels
 Interest and engagement levels
 Socio-demographic background

There is a mismatch between that people say they know and what they do know
When considered together with the Australian Bureau of Statistics research into Australians’ general level of
literacy and numeracy, results suggest that about one in two Australians do not have the skills required to make
informed choices in their interactions with the financial services sector.
Types of Advice:
 Superannuation
 Retirement Income
 Borrowing and credit
 Insurance
 Investments
 Debt management and reduction
 Social security
 Tax minimization
 Property
 Estate planning
Life Stage Categories
 What drives people financially often depends on their life stage
 Very essential to financial planning
 This determines the type of advice they might provide to individuals
Financial Freedom – refers to the situation where enough income is generated form passive sources that a
client’s lifestyle needs can be financed without the need for work. When it comes to achieving financial
freedom, the reality is money is required.
Basic ways to acquire money:
 Marry, inherit or given (affiliation)
Drawback: if you have not learned how to create money yourself, maintaining your wealth over time
may be difficult.
 Earn it by working
Drawback: people have a finite working life
 Make money work for you
Drawback: if you don’t have the experience of running a business or investing
Life Stages:
Stage I: Young Adults and Families (Early Accumulators)
 Between 20’s and 30’s
 A client’s income is often greater than their net worth
 Fiscal fitness must be adopted at this early stage in order to move forward financially
  Financial habits must be adopted. The first habit is savings, irrespective of income
The savings may be earmarked:
 First home deposit
 Starting a business
 Establishing an investment portfolio
Superannuation as a forced savings mechanism via the superannuation guarantee (SG), it alone will not provide
financial freedom without extra sacrifice, savings and investment on their part.

Stage II: Middle Aged Adults and Families (Rapid Accumulators)

 Between 30’s and 50’s
 A client’s net worth exceeds their annual income
 They move into the phase of more rapid wealth accumulation
 The income from investments begin to exceed a person’s annual savings, and net wealth is able to be
accumulated exponentially
 This is when individuals are at their peak earning capacity as employees
 Children also may be either at school at this point, or moving towards independence from the family
allowing both parents to work, earning two incomes, not one, and possible at the same time reducing
expenditure on child related areas of the budget

Stage III: Pre-Retirement (Conservation)

 Between 50’s and 65’s
 The focus tends to be on superannuation and the beginning of plans for how individuals will spend their
retirement.
 A client’s net worth may be 10-15 times their living expenses
 The earnings and any income from pensions might be sufficiently adequate to fund lifestyle
requirements without them working
 This is when financial freedom is achieved, and a choice can be made to work or not, or to semi-retire or
not
 Greater scrutiny is applied to investments and the income generated from investments to fund lifestyle
needs.

Stage IV: Retirement (Aged Care and Gifting)

 At this stage of life, you’ve often walked away from work and are fulfilling your retirement dreams.
 In this life stage you might consider an income stream for superannuation and/or age pension payments.
 You need to ensure you have enough money and health cover to pay for medical expenses.
 Estate planning considerations become increasingly important and decisions about gifting any assets
should be considered.

A License to Provide Advice:

 The term ‘license’ refers to Australian Financial Services License (AFSL) holders and representatives or
authorized representatives of license holders.
 A new entrant to the financial services industry will need to operate under an existing AFSL holder (also
called a licensee) as either an authorized representative or a representative
  The license holder is ultimately responsible for the advice being provided. As such, there is an
obligation to impose compliance and audit requirements on their authorized representatives.
 Some license holders, particularly institutions, will require representatives to work from their premises
where the relationship is more like that of an employee rather than a business partner.
 Other license holders operate more as a franchise and provide far more flexibility for authorized
representatives to operate from their own office premises.
Who provides advice?
Institutionally owned
 This firm of licensee is controlled by a large fund manager, insurance provider or bank
 The approved product list for this type of licensee may be limited
 There also may be an implied preference for the financial advisers to recommend some of the products
or duns owned by the institution to which they are affiliated
 Example: Westpac, ANZ, NAB, CBA (Big Four)
Medium to Large
 Medium to large adviser groups generally are a franchise type of operation, whereby authorized
representatives can choose to trade under their own ‘brand name’ (individual or corporate), or
alternatively the licensee group’s name
 If an adviser does choose to trade under their own ‘brand name’, it is still required by law that they also
disclose and/or co-brand the licensee’s name and AFSL number on the adviser’s stationary or advice
documents.
CBA (licensee – AFSL)

CBA Financial Planning Limited Count Financial Wisdom Others (Crowe Horwath and Infocus)

working under licensee of CBA but not owned by CBA

 The approved product list for medium to large adviser groups may also be restricted, just as they are in
institutionally owned models; It could be because the group is still owned by a bank or large fund
manager. Or it could be because it is impossible to research every possible investment opportunity
within the ‘investment universe’
Small Boutique
 Small boutique advisory firms pride themselves on their boutique and/or ‘independent’ status
 They own and operate their own AFSL often with the help of a specialist outsourced compliance firm
(Pathway, Jigsaw or Goldseal)
 It is not always the case that a small boutique advisory firm will be considered independent in ASICS’s
eyes
 Don’t have the restricted approved product lists that larger advisory groups do. Small boutique firms
may conduct their own research into products they wish to recommend
 One disadvantage is the time consuming and costly nature of being responsible for your own in-depth
research and approved products; this cost can’t be spread across a large number of advisers
 The advantage of being a boutique is that manty clients value the breadth and flexibility of investment
opportunities available
Representative vs. Authorized Representative
Representative
 Employees of a licensee (i.e. an AFSL holder)
 Generally bears no risk
 Is legally liable for the work
 Work as part of the employer’s business
 Perform work themselves and cannot subcontract
Authorized Representative
 Agents or contractors licensed under an AFSL holder
 Typically have more independence
 Work in accordance with a specified contract
 Work as part of their own business and may be associated with other businesses
If they are a corporate authorized representative, they may subcontract, or sub authorize another representative.

The Six Step Process

Product: Absolute clarity about his/her financial position
Financial planners imbued (inspire) with the task of providing advice have a responsibility to the client seeking
advice, to the licensee with whom they are associated and to the profession itself, to ensure that the advice given
is both accurate and comprehensive.
Financial planning as a process provides a framework which allows the client’s needs and goals to be identified,
recommendations to be implemented and modifications to these recommendations to be made in light of
changing circumstances.
Step I: Gather client data
Engagement between client and adviser
Under s961B of the Corporations Act 2001, it is stated that financial advisers must act in the best interests of
their clients.
 FSG (Financial Services Guide) – a document that explains the financial services offered to a retail
client by AFS Licensees or authorized representative upon the initial contact.
Contains:
 how the adviser operates (who will provide the financial service, the kinds of financial services
being provided and for whom the adviser acts in providing the financial service)
 how the service will be provided to the client
 how the adviser is paid (commission and benefits)
 any interest, associations and relationships that might be expected to influence the provision of
the financial services
 dispute resolution system that covers complaints
The information in an FSG must be current and presented clearly and concisely, with enough detail for a
client to make an informed decision about whether to acquire the service.
 Find out why the client has come to see you
The client may have been referred to you, or you may be seeing the client because your licensee has sent
out a marketing offer to their client base. Or it could be an existing client who is seeking more advice.
In financial planning, there is no such thing as a ‘same day sale’
Rapport and trust are two critical ingredients in a successful financial planning relationship.
 Client questionnaire (Client Fact Find) – enables the financial planner to gather information about
personal details about the client (contact details, family status, current net worth, income and
expenditure details, health of the client, short term goals, medium and long term goals, current and
future financial needs, and concerns about inflation, tax, flexibility of investments, needs for easy access
to funds, estate, wills, powers of attorneys, testamentary trust, life and general insurance, consideration
of retirement planning issues, both financial and non-financial).
It is an important document as it forms the basis for making product recommendations to your clients
and is evidence of the requirement to meet your obligations under the Corporations Act – acting in
clients’ best interests.

 Capturing the client’s risk tolerance – This means assessing the client’s acceptance and tolerance of risk.
 concern regarding inflation
 need for current income
 liquidity requirements
 liquidity requirements
 desire for growth of capital
 concern regarding loss of capital
 concern about taxation issues
 attitude towards the security of the investment
 desire for ease of management
 impact of decisions on estate planning needs
 desire for flexibility of any investments
 time frame over which any investments will be made
 comfort with short term volatility of returns.
May or may not be included in the client questionnaire but must have a risk profile questionnaire.
(attitudes, values and experience in terms of wealth and investment)
The questions are straightforward and focus on attitudes to various situations.

Three common problems with regards to adequately assessing their client’s attitude to risk:
 Disconnect between couples - A ‘client’ is often a couple (two people not one), and couples do
not always share the same attitude to risk.
Action to take: It is important in these situations to remain impartial and not ‘gang up’ on either
party to win them over. It is important as an adviser to point out the implications of moving
along the risk spectrum
 Disconnect between goals and required risk - a client has unrealistic expectations of achieving
certain goals. For example, the client may wish to retire within a certain period of time and live
on an amount of funds not consistent with the investment return they are currently on track to
earn. To reach their goals, they would need to earn a higher investment rate of return, involving
higher risk. Often there is a disconnect between the risk the client is prepared to undertake to
achieve their goals, and the higher risk they would need to take to increase the chance of meeting
their goals.
Action to take: After analyzing the client’s situation, an adviser may say something like,
“unfortunately your current investment risk profile is unlikely to achieve the results you are
hoping for. This means there are two options. Firstly, you could revise your expectations about
your retirement income down, or secondly, you may need to move up the risk spectrum to give
you a better chance of meeting your goals – whilst understanding the significance of any
additional risk you undertake particularly in the short to medium term”.
 Bull market fever - the realization that clients might say and think they are comfortable with a
given risk profile, but in reality, when they are staring down the barrel of capital losses, they are
very uncomfortable with the level of risk associated with their investments.
 Action to take: it is important to clearly explain the short to medium term range of possible
returns their investments might deliver. The emphasis should be on the downside risks (should
they occur).
Step II: Establish financial goals and objectives
The role of the financial planner is to listen carefully both to what is said by the client and also to what is not
said by the client. The financial planner must ask questions that are open ended in an attempt to encourage the
client to provide as much detail as possible about their needs, concerns and aspirations.
 Access some of the information from the client questionnaire
 Conduct a client interview
Both talking and listening are important elements when interacting with your clients. By actively listening,
focusing on what the client is saying, making eye contact with the client, being aware of any non-verbal
communication and summarizing what you hear the client say, there is a much greater chance you will
successfully build strong client relationships.

Step III: Identify financial problems

Common financial problems:
 Managing money
Clients will often be earning quite high income, but either be unable to save money, or even worse, find
themselves going backwards financially and plugging the spending gap with credit cards.

 Completing a budget, monitor spending

Discretionary Accounts – perspective of the product provider; the client has no discretion on the
funds to be allocated
Non-discretionary Accounts – perspective of the client; the product provider has no discretion over
the investments to be allocated
 Prioritize spending after reviewing spending habits and understand the consequences to future
financial plans of both ‘action’ and ‘inaction’ with regards to managing expenditure.
 literally cutting up credit and using cash for purchases works
Budgeting
 the act of first reviewing cash flow by identifying all income and expenses and comparing them
to see how cash earned is actually spent.
 decisions can be made to adjust either or both the income and the amount of expenditure in order
to achieve certain goals
 budgeting requires only basic math and a desire to take control of a financial situation.
 provides both a financial planner and the client key information about the client’s net position
and is fundamental to sound financial decisions.
 It can be used to:
 project future cash flows
 understand a client’s actual position
 create what-if scenarios to assist in financial decision-making
 determine if a client will achieve a financial goal over time given similar activities
 identify opportunities to adjust behaviors to achieve financial goals
 Reviewing actual expenses over a period of time against projected budgets can improve the accuracy
of future forecasts. Thus, budgets are living documents that change as lifestyle, income and expenses
alter. Budgets, like financial plans, should be regularly updated, and should underpin a financial
plan. In fact, creating a budget and living by it is a life skill which can make a real difference in
assisting clients to reach their goals.
 Changes in family circumstances
May place short to medium term strain on the family’s ability to meet their expenditure needs, or
alternatively to save as much as they were able, prior to the reduction in family income.

o Prepare a detailed cash flow model for the client

 This model should show their income and expenditure over time.
 The model should identify in which periods there will be a cash deficit, so you can
recommend and implement strategies in the short to medium term to overcome this
problem.
 The model should also show when the deficit ends, and a surplus or neutral position is
likely to be achieved.
Pro tip: This type of modelling requires either the use of excel, a financial calculator or specific
financial planning software such as Coin, Xplan or Midwinter.

 Dealing with large expenditures

o To have clients decide about whether the client can afford it or not
This should be shown in terms of the financial impact on their current and future lifestyle via a
cash flow model
Pro Tip: In some circumstances, the goals and objectives of the client are not likely to be
achieved. It is important to inform clients when their goals and objectives are unrealistic, and to
illustrate what would be required in order to achieve such goals.

Step IV: Prepare a set of written recommendations - SOA

It is the stage at which the financial planner produces the set of written recommendations or a Statement of
Advice (SOA) which establish how the client’s goals and objectives can be met.
The recommendations will cover all issues relevant to the client and may include recommendations about
investments strategies, retirement planning, risk management, estate planning, tax planning and social security
issues.
The recommendations should address the short term, medium term and long term goals and provide an estimate
of the impact of the recommendations on future cash flows.
The set of written recommendations should clearly show how the recommended strategies will enable the client
to meet their goals.
Letter of Engagement
 itemizes what the adviser will do and the associated cost.
 This ensures that in the event the client has second thoughts about wanting to continue with the advice,
the adviser is still paid for their work they do in preparing the recommendations.
 Before you document the advice to your client, you need to ensure you and your client both agree which
areas of advice you will address.
The scope of advice
Comprehensive advice (holistic advice) – ‘traditional’ advice model offered by financial advice licensees.
Advisers make detailed client enquiries and provide advice to the client on all relevant aspects of their financial
circumstances.
Licensees largely view comprehensive advice as optimal in ensuring client needs are adequately and thoroughly
met and addressed. It is argued that:
- comprehensive advice ensures that a client‘s full objectives, needs and financial position are considered,
which may be at risk if advice is isolated to a particular area or subject matter
- clients may seek scaled advice based upon their own potentially incorrect or inaccurate assumptions
about their objectives, needs and financial position to their detriment
- comprehensive advice may be the only suitable type of advice for certain clients, depending on their
individual circumstances. For example, scaled advice may not be appropriate for clients in the retiree
and pre-retiree market who need broad advice on their retirement planning strategies
- the provision of scaled advice may require the same amount of time and effort as comprehensive advice.
Limited advice (scaled advice) – provided on a single issue or on a limited range of issues. Industry has adopted
differing terminology to refer to this type of advice including, but not limited to:
 limited advice
 single issue advice
 targeted advice
 defined scope advice
 simple advice
 piece-by-piece simple advice
Scaled advice is inevitable in many circumstances, despite the potential risk to both client and adviser.
Potential Risks
The risk of scaled advice
- only one area is the adviser does not understand the complete client picture.
- The risk to the adviser is that this inadequate advice could cause the client economic loss (or an
opportunity cost).
How is scaled advice implemented in reality?
When considering how the requirements of the best interest’s duty can be applied flexibly, it is important to
note that the same rules apply to all personal advice on a particular topic. There are not two sets of rules one for
‘comprehensive’ advice and one for ‘scaled’ advice that is more limited in scope. This means that complying
with the best interest’s duty and related obligations remain equally relevant for persons who are providing, or
are considering providing, ‘scaled’ advice.
When limiting the scope of advice, you must ensure that you do not exclude critical issues that are relevant to
the subject matter of the advice.

Fee Disclosure Statement (FDS) – outlines the fees and charges and services provided to the client on a 12-
month period. Applicable for clients who subscribed or is on an ongoing fee agreement with the provider.
An ‘ongoing fee arrangement’ is a fee (either fixed or percentage) paid during a period of more than 12 months
where:
 personal advice is given to a retail client;
  the client has entered into an arrangement with the financial services licensee or representative who
gives the advice; and
 under that arrangement, a fee is to be paid during a period of more than 12 months.
An ongoing fee arrangement does not apply if a client merely undertakes a payment plan for work conducted in
relation to an upfront fee, an insurance premium is paid, or product fees are paid.
An FDS must be sent to a client within 30 days after the 12-month anniversary date (known as the ‘disclosure
date’) of the client entering into the ongoing fee arrangement with the adviser. The disclosure date will often be
the date the client and adviser have signed the Ongoing Service Agreement.

Opt-In renewal notices

The aim of the opt-in renewal notices requirement is to ensure clients consider whether or not the ongoing
services they receive continue to provide them with value for money and encourage them to discuss ongoing
needs with their financial adviser.
This means that for the licensee or adviser to continue to charge an ongoing fee for more than 24 months, the
licensee or representative must provide both a Fee Disclosure Statement and a renewal notice to the client
before the end of the period of 30 days beginning either:
 24 months after the day the arrangement was entered into; or
 if an arrangement has previously been renewed, 24 months from the last day on which the arrangement
was renewed.
A renewal notice must state that:
 the client may renew the arrangement by giving notice in writing;
 the arrangement will terminate, and no further advice will be provided, or fee charged under it, if the
client does not elect to renew the arrangement;
 the client will be taken to have elected not to renew the arrangement if they do not notify in writing of
an election to renew before the end of the 30-day renewal period; and
 the renewal period is a period of 30 days beginning on the day on which the renewal notice and Fee
Disclosure Statement is provided to the client.
It is allowable for a Fee Disclosure Statement and renewal notice to be incorporated into a single notice that
contains all of the requisite information and there is flexibility in how these documents can be provided to
clients.
A financial adviser must not:
 accept conflicted remuneration (either monetary or non-monetary);
 give an employee conflicted remuneration; and/or
 charge asset-based fees on geared portions of investments.
Conflicted remuneration is defined as any benefit (either monetary or non-monetary) given to a licensee or their
representative who provides general or personal financial product advice to retail clients that could reasonably
be expected to influence the choice of financial product recommended or the financial advice given.
Financial product advice is a recommendation or a statement of opinion, or a report of either of those things that
is, or could reasonably be regarded as being, intended to influence a person or persons in making a decision
about a particular financial product or class of financial products, or an interest in particular financial product or
class of financial products.
Approved Product List (APL) – list of investment, risk insurance products and classes of financial products
that the licensee has approved to be used by the representative or authorized representative.
Non-approved products are those products or asset classes that the licensee has specifically excluded from its
approved list. They might be excluded because the licensee does not like the style of management of a
particular fund, or the performance might not be considered adequate. It could also be that the products are part
of an asset class that the licensee is precluded from either advising on e.g. tax effective agricultural schemes or
property syndicates or horse racing syndicates.

Documenting the Advice – most costly and labor-intensive part. Ensure that you are providing the client with
proper documentation.
Statement of Advice (SOA) - is a disclosure document that helps a retail client understand and decide whether to
rely on the personal advice provided by a representative of a licensee.
Must include:
 A statement of advice given to the client
 The information on which it is based
 How the advice is paid, including any commissions and other benefits that might reasonably be expected
to influence them
 Any interests (whether pecuniary or not, direct or indirect) and any associations or relationships that
could influence the provision of advice
 A suitable warning that the information is based ion limited information, and hence the advice is
restricted and limited to that extent, if the advice is based on incomplete or inaccurate information;
s947B and 947C of the corporations’ act.
The information in an SOA must be presented clearly and concisely, with enough detail for a client to make an
informed decision about whether to act on the advice.
An SOA is not required where only general advice is provided; however, the adviser must warn the client about
the limitations of the ‘general’ advice provided: s949A of the Corporations Act.

Product Disclosure Statement

If the recommendations within the SOA include investment recommendations that contain either managed
funds or investment platforms, then a product disclosure statement is also needed as an accompaniment to the
SOA
A PDS is a point-of-sale document prepared by or on behalf of the person providing the financial product. It
should be given to a retail client at or before the time a recommendation is made to acquire a financial product
or an offer is made to issue or arrange for the issue of a financial product and before the client acquires the
financial product: s1012A(3)
A PDS must set out:
 Contact details for the issuer and seller of the product
 Significant benefits of the product
 Costs payable of the product
 Commissions that may impact the returns
 any other significant characteristics or features of the product
 significant taxation implications
 Significant risks associated with the product
 Information about dispute resolution system for the product
  Information about any cooling off regime that applies in respect of the product
 Any other information that might have a material influence in the decision to acquire the product
Charging the client for advice (fees)
 Complexity of the advice provided
 Level of support required by the advice recipient
 Qualifications and experience of the adviser
 Level of service agreed upon

Step V: Start implementing the plan

The financial planner’s role in this step is to ensure that all necessary paper work is completed and that the
client is fully aware of the steps necessary to implement the plan.
Straight-through-processing (STP)
Using software that has STP means that you input client data once, and you use the same data to actually model
the client scenario and then produce the recommendations in the SOA.

Step VII: Review, revise and maintain the financial plan

Reviewing a plan by comparing the performance of any investment recommendations, assessing whether or not
the plan is on track to achieve the client’s goals and objectives in the light of changes to economic, legislative
and personal circumstances, and consideration of the likelihood that the current plan will continue to meet the
client’s goals and objectives.
Revising the plan is necessary if any changes in the above circumstances affecting the client impact upon the
suitability of the plan in its current state.
Maintaining a financial plan allows the client to call you, the adviser, at any time to query anything that is of
concern to them

The Regulatory Framework in Financial Planning

To ensure consumers receive the most appropriate advice, the financial services industry is regulated by the
Australian Securities and Investments Commission (ASIC). Those providing financial advice must hold an
Australian Financial Services License (AFSL) or be authorized as a representative of an AFSL holder.
RG146
Anyone who provide personal or general advice on financial products to retail clients must meet the training
standards set out in RG146
ASIC’s nine skills requirement identify the necessary skills advisers must have
 Establish relationship with clients
 Identify client objectives, needs and financial situation
 Analyze client objectives, needs, financial situation and risk profile
 Develop appropriate strategies and solutions
 Present appropriate strategies and solutions
 Negotiate financial plan, policy or transaction with client
 Coordinate implementation of agreed plan, policy or transaction
 Complete and maintain necessary documentation
  Provide ongoing service
Under the new legislation:
 The term financial planner/adviser will be enshrined in law
 An independent standard body will be established from July 1, 2017
 They will develop an industry exam and code of ethics, work with education providers and set education
standards, and determine the level of supervised work and ongoing CPD requirements

Personal or General Advice

Personal advice takes a client’s objectives, financial situation and needs into account, and recommends
appropriate strategies and financial products.
It is given in circumstances where:
 The provider of the advice has considered one or more of the person’s objectives, financial situation and
needs; or
 A reasonable person might expect the provider to have considered one or more of those matters.
General advice is an advice that is not personal advice. It may be generic information or advice that is not
specifically tailored to suit a particular client.

Quality of Advice
Good quality of advice - improves a client’s financial situation. This is not necessarily confined to a monetary
improvement, but encompasses a person‘s preparedness for the future
It has some or all of the following features:
 A clearly defined scope and a thorough investigation of the client’s relevant personal circumstances
 Assistance given by the adviser to the client to set prioritized, specific and measurable goals and
objectives
 Where relevant, consideration of potential strategies
 Where relevant, consideration of the wider impact of the advice (tax or social security consequences)
 Good communication with the client – SOAs are logically structured and easy to understand, and verbal
interactions that aim to ensure that the advice and recommendations are understood.

Principles that underpin good quality advice were identified:

 Meets the client’s needs and requirements of the law
 Refines and clarifies the client’s objectives and help the client achieve the objectives
 It can be comprehensive or limited in scope, depending on the client’s needs ad circumstances
 Educates and equips clients to make informed decisions about their finances, including whether to
accept and implement the strategies and products recommended to them
 Sound strategic advice is a key component of good quality advice. Product recommendations should
follow rather than direct the suggested strategies
 Involves good communication including SOAs and verbal communications

Advice Grades
 Good quality advice
  appropriate in accordance with the law
 the adviser has improved the client’s financial situation
 the adviser has clearly defined the scope of the advice and obtained detailed information about
the client’s relevant objectives, financial situation and needs.
 The adviser assists the client to set and prioritize specific and measurable goals and objectives.
 The strategy meets the client’s relevant personal circumstances well, is specific, measurable and
achievable, does not expose the client to more risk than necessary, and presents options.
 The adviser considers the wider impact of the advice
 Good communication with the client
 SOAs are logically structured and easy to understand and verbal interactions that aim to ensure
that the advice and recommendations are understood.
 Products meet the strategy

 Adequate quality advice

 appropriate in accordance with the law
 obtained info about the client’s relevant objectives, financial situation and needs.
 The strategies are reasonable but may not necessarily improve the client‘s situation
 The products recommended are suitable for the client but other products, which could deliver
more value, may not have been recommended.

 Poor quality advice

 has not obtained sufficient info about the client’s personal circumstance
 does not make reasonable inquiries
 makes little attempt to clarify the client’s retirement expectations
 the strategy does not meet the client’s personal circumstances or is unrealistic.
 The recommended products may not meet the client’s personal circumstances

Client File Requirements

 FSG – is a document that identifies the scope of services offered by an adviser, including what areas of
advice is authorized, fee structures, complaints procedures etc.
 Client questionnaire – it must be kept on file (or at least electronically) to ensure a full picture of a
client’s situation is documented
 First appointment file note – extraction of the key information from the first interview that is relevant
towards developing a financial plan
 Advice file note – advice needs to be reviewed regularly, often even outside of specified agreed reviews.
The reasons why an adviser may be required to issue additional written advice to an existing client
outside of agreed review periods vary. It could be a change in legislation, a change in investment
markets, an inheritance or windfall, or a change in a client’s family circumstance (divorce, job loss) that
warrants additional advice.
 Risk profile – determine investment appetite
*the only time a risk profile does not need to be completed is if an execution only transaction is being
conducted.
 Authority to Proceed - It acknowledges that the adviser has explained the contents of the SOA,
confirmed the client’s risk profile, and it also puts context around elements of the SOA such as past
performance and future projections via legal disclaimers that limit future legal action by a client on
certain areas
 Execution only – if a client request an adviser facilitate a transaction with no advice at all, an adviser
must get a client to sign an ‘execution only’ document
 Option to quote Tax File Number – in behalf of the ATO. They must withhold tax if a TFN is not
provided, so it is important that a client or company TFN is included on all applications to avoid
unintended withholding tax.
 Service agreement – outlines what services the adviser will provide to the client both initially and
ongoing and the fees and obligations are clearly outlined in this document
 Client contact cover sheet – ensures no matter who in the office picks up the file, they are sufficiently up
to speed with what has been happening (or not been happening) in relation to the client.
 Client file note – an in-depth explanation of what is also contained in the client contact cover sheet
 Review appointment file note – done on a semi-annual or annual basis but can be conducted regularly.