How to ensure you’re acting in your client’s best interests
Running a profitable business can be a tough job, particularly in these challenging times. It’s even more difficult with the new FASEA laws in place and understanding the obligations you have under these. The primary aspect of the compliance process is to ensure that the advice that is provided is in the best interests of the client.
The best interests duty and related obligations are designed to ensure that clients receive advice that meets their objectives, financial situation and needs, and that you act in the best interests of your clients when providing that advice. Advisers can have varying opinions on what this looks like for their clients and it can become an issue during the compliance process as the compliance person does not personally know the client.
To satisfy the best interests duty you have to show that a reasonable financial planner would at the time the advice was provided agree that the advice was likely to leave the client in a better position than otherwise would be the case.
One of the easiest ways to ensure you’re acting in the best interests of your client is by proving goals-based advice, rather than using products as the basis for your recommendations. When you put your client’s goals at the forefront of your advice, it becomes easier to justify how your advice will leave them better off.
A goals-based advice approach also provides opportunities for you and your clients. It provides a platform for a long-term relationship as the client moves through different life stages. It can also lead to an expansion of services delivered to the client as their needs and goals evolve.
Something to consider when providing goals-based advice is the ‘financial life stages’ of a client. The below is an illustration I use as a guide to what a ‘general’ client would go through in life. This chart would assist me in developing the right strategy, without utilising any products until needed.
As a previous owner of a financial planning business, I do appreciate the pressures of ensuring a business is both compliant and profitable. Remembering that you need to demonstrate that you are meeting the client’s best interest duty is key to the compliance process. Listening to your client’s goals and working out a strategy to meet them is also key for a long and profitable relationship, as well as a sustainable business.