ASSET 1 - FEBRUARY 2021

FEATURES | FADC

Adviser Code breach A North Island adviser’s record keeping, and whether she had provided personalised advice to four clients in question, was reviewed by the Financial Advisers Disciplinary Committee in December.

T

he Financial Advisers Disciplinary Committee (FADC) has fired a warning shot about record keeping over the heads of advisers on the eve of the new financial advice regime.

The adviser caught in the crossfire was monitored in 2020 regarding her business practices in 2017 and 2018. In a hearing in December, she was found to have breached standards 12 and 15 of the outgoing code of conduct. The committee was composed of Judge Bruce Robertson, Tracey Berry and SarahJane Weir.

In question was whether, by having knowledge of a handful of circumstances of each of four clients in question, the adviser had been in the business of providing “personalised advice”, and if so, whether her records were adequate.

For the FMA, Simon Chapman introduced excerpts and analysis of the adviser’s notes in relation to the four clients. Much of the hearing was spent discussing the definition of “personalised service”, “client”, and types of advice – including “class advice”, “limited advice and “no advice”.

With an office in a North Island city, the adviser is also an insurance agent, tax agent, certified financial planner and chartered life underwriter as well as running a residential property service.

Her 35 years in the wider industry may 24 | ASSET 01 | 2021

have motivated the opening statement in the decision; “This is a case about breaches of the Code. It is not about the integrity of the [adviser] and there is no suggestion that she has improperly benefited at the expense of her clients, or that any client has been disadvantaged.

But, the provisions of the Code are fundamental and adherence to them is always required.”

The adviser was represented by Wellington barrister Lisa Hansen.

The decision summarised Hansen’s defence; “As the oral hearing progressed, and we were able to get beyond the avalanche of words, it became apparent that the [adviser] was of the view that she was not providing financial advice by a personalised service unless and until she had received and documented the entire circumstances of a client, including their existing financial position and its makeup and she had an appreciation of their goals and aspirations.”

Chapman read from Section 15 of the Act that the definition of personalised service is if the adviser takes into account the personal financial situation or goals of the client, but the adviser reiterated that her threshold for personalised service related to completion of a financial questionnaire and signing up for financial advice.

The fact that she was aware of occasional circumstances or ambitions

of casual clients did not, in her view, amount to personalised service.

Client file one A couple holidaying in the US were beamed into the hearing to discuss whether they had received personalised service from the adviser, whom they had known for 15 years. After a series of emails in 2017 regarding KiwiSaver, life insurance, and a potential family property, there were a number of meetings which failed to result in the couple filling out the necessary financial questionnaire in order to receive personalised service.

The FMA’s Chapman pointed out that the adviser had noted a long-held insurance policy should be retained, and that this represented personalised service. All the adviser's notes pointed to this circumstance: “They needed little or no advice, (the client’s name) has it all in her hands.”

While the adviser acknowledged some of the circumstances of the blended family and their “wider and older” health status, she did not believe that this advice to keep a “gold standard” insurance policy was personalised service.

In this case, the defence provided satisfied the committee, who found that the note accurately recorded the situation.