The role of paraplanners in compliance has been highlighted at the FPA Congress, with discussion turning to the FASEA Code of Ethics which continues to present complications.
Nadia Docker is director, client engagement at Integrity Compliance and part of her role sees her auditing AFSLs for compliance.
She took to the stage with Kate Fellows, director of The Professional Planner, to highlight some of the practical compliance issues facing paraplanners.
The session first addressed client goals and objectives, looking at the Corporations Act and ASIC's work in enforcement, as well as touching on the FASEA Code of Ethics.
"To the best of my abilities I have tried to include how the FASEA Code of Ethics might apply to these compliance areas," Docker said.
She pointed out that one of the areas that's often overlooked is the question of what kind of a budget the person has for financial planning, and how that should come into outlining goals.
"ASIC is cracking down on this. When you are talking goals and objectives [with clients] you can start with the big picture but you need to start educating them about your investment philosophies and the products you are using," Docker said.
Client education and taking the time to explain options is key, Docker explained.
Issues like whether direct shares are appropriate or whether a passive or active investment approach is preferred need to be addressed in some detail, she said.
"ASIC doesn't like goals that could apply to anyone," Docker said.
By that, Docker said the regulator wants to see goals that are specific, measurable, attainable, and relevant to the individual while achievable within an appropriate time frame.
Docker said she reviews hundreds of Statements of Advice and finds that over and over again, goals are not specific enough or lack all of the key elements that make a goal compliant.
Touching on the FASEA Code of Ethics, Docker explained Standard 6 could be read to mean that subject and scope are going to become more important and that should be reflected in an SOA.
For example, paraplanners need to explain why certain issues were not addressed to accurately outline the scope of the advice in their SOAs.
Having good reasons for why some issues were not addressed and being able to prove that the client does not want advice on those issues is important to clearly define the scope of the advice given.
Following on from the discussion of goal setting and scope, the subject of product replacement was raised.
Docker read out some comments from ASIC which clarified points on product replacement.
She relayed a comment by ASIC's Louise Macaulay: "ASIC frequently sees advice that recommends a new product which does not improve the client's overall position."
And another from Leah Sciacca, who said: "We see many files that site theoretical benefits of a new product, such as broader investment options."
These insights from ASIC explain the kind of justification that is required to switch products in a compliant manner, Docker said.
ASIC is wary of product switching with flimsy reasoning behind it, she said.
"An easy reason is cost savings. But those cost savings need to be considerable. It comes down to, could those outcomes have been achieved in the existing product?" Docker said.
Fellows added that when it comes to how paraplanners can help meet compliance challenges, it's important not to rely on SOA templates and to really consider the individual needs of clients.
"As paraplanners it comes down to us, we cannot produce cookie cutter SOAs," Fellows said.