More Work Needed to Increase Client Engagement


With the FMA increasing its engagement with FAPs, Compliance Refinery’s CEO Steven Burgess says advisers need to place more emphasis on ensuring their clients understand the advice they are offered.

“While generic risks and limitations are often documented, advisers frequently overlook client-specific issues and implications in their advice,” he says. “It’s crucial to step back, evaluate the advice, and anticipate potential pitfalls or unintended consequences.”

Burgess says identifying risks or disadvantages relating to advice involves a multifaceted approach.

Steven Burgess, CEO, Compliance Refinery
Steven Burgess, CEO, Compliance Refinery.

“Think about the client’s situation and objectives,” he says. “Is there any risk at all that the client may not achieve their objectives, and why?

“These aspects can be product-related, client or adviser limitations placed on the advice, or external influences such as economic or market conditions.”

Burgess advises that this should be made clear in simple terms to provide a link between what advisers recommend and the implications – as they relate specifically to the client’s situation and objectives.

“The FMA seeks tangible evidence of advisers ensuring client understanding,” says Burgess. “Merely obtaining a client’s signature on an authority to proceed falls short.

“A more effective approach involves incorporating a tick-box disclaimer into the authority to proceed, prompting clients to acknowledge understanding before signing.”

This, says Burgess, should be supplemented with thorough file notes demonstrating efforts to assess and confirm the client’s comprehension.

“A careful approach to spotting and dealing with risks and limitations in financial advice means clients make fully informed choices,” he says.

“And there is less chance of expectations not being met later down the track.”