ASIC, Compliance, financial advice

External information can lower risk


Pointing clients to investment guidance provided by organisations such as ASIC is a good way to minimising the risk of an advisory practice.

Advisers should refer their clients to guidance materials provided by the Australian Securities and Investments Commission (ASIC) whenever possible as a prudent method of reducing their practice risk, a financial services compliance professional has recommended.

“We always refer our clients to the ASIC MoneySmart website. So if they want to do a calculation or projection on their investments go to MoneySmart. If they want to know what their super balance will be go to MoneySmart. If they want to know what an applicable budget would be and how much money to spend go to MoneySmart,” Alexis Compliance and Risk principal Christina Kalantzis told delegates at the recent SMSF Professionals Day 2023 co-hosted by selfmanagedsuper and Accurium.

She revealed the reasoning behind this practice is to adopt the principles of general advice as a risk mitigation exercise.

“Under the general advice principles the way to evidence general advice is cut and paste it from somewhere else so we can use those investment materials as evidence should we get in trouble with ASIC,” she explained.

“Our role is to advise but if the regulator is going to pick us up on the little things we will go back and reference what ASIC describes as risk disclosures.”

According to Kalantzis it is now more important than ever for advisers to ensure their clients are well educated about the current state of investment markets and what is being done with their investment portfolio in response to these economic conditions.

“We’re producing documents for clients which is a whole education tool explaining what risks are. So we tell them why we’re not changing our position in what we’re doing and the reasons for it. We acknowledge their risk profile but tell them there is more than a 10 per cent variance in it,” she said.

“We also tell the client if they want to take a conservative position they’re not going to meet their retirement needs. We tell them that straight out,” she added.

“This has to be articulated in the fact find as a warning, in the SOA (statement of advice), on their risk assessment when you do their risk profile you should write a note in there as well, you should talk about the variance back in the SOA and as a review note. Then you should load them up with education.”

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