5 Simple Steps To Audit Yourself
Advice Processes & Best Practice Advice & Compliance

5 Simple Steps To Audit Yourself

September 18, 2020

by Tony Vidler  CFP logo   CLU logo  ChFC logo

How can an adviser be confident their advice is good before trouble starts?  In other words, how do you audit yourself?

 

There are 5 key things that the adviser must do – and be able to evidence afterwards – to show that they have worked for the benefit of the client, and not acted out of self-interest.  To demonstrate that you must essentially show that you know your client well enough to have delivered relevant advice.

Knowing your client (as a general principle of regulatory testing) is about understanding the clients situation and needs in order to provide suitable financial advice that is most likely to help them achieve their objectives.
The 5 things an adviser must do in order to play it safe, and be able to show they have been working in the clients interests, consist of 3 process steps and 2 ethical considerations.  They are:
1.  Identify the objectives and needs of the client, together with knowing the pertinent facts of the clients financial situation
2.  There must be clear instructions regarding what advice is being sought, or offered, and any limitations which apply to that.
3.  The client priorities need to be understood and documented, as it is typical for their to be competing choices and compromises made.
Gathering the right information and having clear understanding with the client, as outlined in these three steps, will go a long way towards satisfying future critics.  However, to ensure that you are REALLY working in the client’s best interest, two further tests can be applied.
4.  Did you attempt to find out more information regarding the client’s circumstances if there is any question that the information provided by the client was inaccurate or incomplete?

5.  Do you have the competency and expertise to provide the advice required?   Let’s not kid ourselves here….we know whether we know enough…and we know when we don’t know enough or are getting into areas beyond our expertise….the challenge is really making sure we don’t step over the line into advising beyond our demonstrable competency.   

 

If you find yourself as an adviser thinking “I don’t think I have the knowledge to do that really well”….then you really should decline to try and provide the advice.  Otherwise you are inviting future dissatisfaction and problems at the very least…or a change in career at the very worst.

One of the key things that is often misunderstood by financial advisers is that you will rarely be playing in terribly unsafe territory because of product non-performance (e.g. problem insurance claims, investment market losses) – IF your process is sound.  The adviser will be judged primarily on the basis of the processes they can prove to have used, and the extent to which they have demonstrated the principle of “the clients’ interest first”.
To play it safe as an adviser therefore there are 2 big things to do:
* have a process showing you understand your client, their circumstances, objectives and priorities
* assess your own knowledge base honestly and stay within your limits
Most advisers who get into trouble with the regulatory bodies do so because of process failure (or lack of ability to evidence their processes) or for delivering unsuitable advice.  The unsuitable advice is typically a result of the adviser not sticking within their own professional competency boundaries.
To avoid that, you really should constantly audit yourself.
You might also be interested in this related article:
Are You Giving Good Advice, Or Giving Them What They Want?
Get financial adviser coach blog updates via email.
Enter your email address to follow this blog and receive notifications of new posts by email.
Join 305 other followers

sidebar_tony
Facebook: 2831, Twitter: 13679, LinkedIn: 689

Follow tonyvidler on

Comments (1)

Leave a Reply