Presentation and discussion of solutions Before you present any - PDF document

Presentation and discussion of solutions Before you present any recommendation to a client you need to ensure you are able to explain the reasoning that supports your recommended strategies and selected products. There are two outcomes you need to focus on when presenting your recommendation. 1. Show and explain to the client how the recommended strategies selected products will enable them to meet their goals and objectives. 2. Gain the client’s understating of the above and together obtain agreement to proceed with the implementation of the recommendation. Once agreement with the client has been reached, you will need to finalise the client file and complete any application forms. Appropriate advice • Under Section 945A of the Corporations Law you must ensure that your recommendations are appropriate to the investment objectives, financial situation and particular needs of your client. • You must also be able to explain to the client why the recommendation is considered appropriate • Appropriate advice can be broken down into essential components that must be proved to ensure that the client’s needs and objectives have been met Diploma of Financial Planning - 2012

Investment Advice • Is the strategy clearly defined by the scope of advice and meet with the client’s objectives and needs? • Does the strategy make sense and is it technically competent? • If the advice is or may not be appropriate is the an explanation included as to why not • Do the products recommended fit the strategy? • Are the products clearly linked to the objectives & have the benefits of the products been clearly explained. Has the adviser actually done adequate research that is tailored for this particular client; or is it apparent that data and research has been just cut and pasted from a website? • Is there a clear statement about risks and volatility, specifically in relation to the client’s situation and the recommendations made? • Is the assigned asset allocation consistent with the client’s risk profile and their investment timeframe? • Is there evidence that alternative strategies and products have been considered if applicable? • If there are variances in the asset allocation, are they explained? • Are any inconsistencies between the client profile, objectives and timeframe explained? Diploma of Financial Planning - 2012

Retirement • Is there a current need met and future projection or estimation of income and cash flow? • Has there been correct taxation treatment of incomes? • Have Centrelink benefits been covered? • Are any special assumptions required to be stated? Are there other facts that need to be addressed such as one partner retiring whilst another is working or Transition to retirement? • Any short lump sum funds needed for once off expenses? Borrowing to Invest (i.e. Gearing) • Is the risk of the strategy understood? • Is the client investor profile appropriate? • Is there adequate cash flow to support the interest on the investment loan (i.e. the borrowed amount) that is used for the investment? • Is the investment loan interest only or principle and interest? What are the pros and cons of each type of loan? • Has there been correct treatment of investment income and interest payments – i.e. is the loan and the investment in the appropriate client’s name (i.e. presuming there is more than one client (i.e. husband and wife) and each is on a different tax scale) • Is there discussion of cash flow protection? Diploma of Financial Planning - 2012

• Is there a projection of income and cash flow from the strategy? • Has there been correct taxation treatment of income? • Has the risk of rising interest rates been assessed via a sensitivity analysis – i.e. would a 3% increase in interest rates cause the client to default on the interest payments? Hence have you built in this “buffer”? • Are the assumptions provided reasonable? Replace or switch an existing financial product • Is there an appropriate reasoning for recommending a switch? • Are all exit or transfer fees/commissions paid to you or other entities clearly explained in writing to the client? • Are there any other known, or reasonably expected to know consequences arising from a switch of product and these must be explained e.g. loss of insurance when switching super, capital gains tax Have you disclosed any conflicts of interest? Wealth Protection or Personal Risk Insurance (Life, TPD, Trauma, Income Protection and Business Protection Insurances) • Is the strategy clearly related to the client’s objectives and needs? • Does the strategy make sense and is it understood by the client? • Is the strategy technically correct? • Does the strategy completely address the detailed scope of advice or an explanation included as to why not? Diploma of Financial Planning - 2012

• Has holistic advice been given and if not has the appropriate warnings been inserted? • Do the products fit the strategy? • Has the Financial Planner clearly explained the benefits of the products, in relation to the client’s needs and objectives as opposed to just the features or “bells and whistles” of the product? • Is the client clearly aware of the dangers of not having adequate or appropriate wealth protection insurances? • Has the client been provided with and signed off on a quotation that clearly shows the annual increase in premiums? • Have the tax implications of any potential insurance benefits been discussed – this could be very significant if the insurances are held via a third party or company and/or if the payment is made to another person. Diploma of Financial Planning - 2012