Why you need the annual record of advice in writing

In terms of FAIS (Financial Advisory and Intermediary Services) legislation, an advisor or broker is obliged to deal with their client in accordance with the General Code of Conduct for Authorised Financial Services Providers and Representatives. Published under Board Notice 80 in Government Gazette 25299 of 8 August 2003 and as amended.

Record of Advice

Here is the paragraph about Record of Advice:

(1) A provider must, ……. maintain a record of the advice furnished to a client …, which record must reflect the basis on which the advice was given, and in particular:

(a) A brief summary of the information and material on which the advice was based;

(b) The financial products which were considered;

(c) The financial product or products recommended with an explanation of why the product or products selected, is or are likely to satisfy the client’s identified needs and objectives; and

(2) A provider, other than a direct marketer, must provide a client with a copy of the record contemplated in 9(1) in writing.

The standard of written advice to be expected can be summarised as follows:

a) It should briefly mention the prescribed needs (buildings, liability and fidelity), confirming that the advice has been accounted for. This would be the basis on which the advice was given per (1)(a) above.

b) It should compare quotations with the full quotations separately provided, i.e. meeting the client’s needs and reflecting the products considered per (1)(b) above.

c) The actual advice should be there. It is suggested that the advisor should clearly state the advice in a summary form to explain which product they recommend and why.

To further simplify and summarise:

1. The broker or advisor – before inception of any policy and on annual review or renewal – must provide the body corporate with a Letter of Advice (LOA) or alternative suitable record of such advice.
2. This should include comparisons to other similar products, in other words, comparative quotations which provide solutions for the body corporate’s needs.
3. The Letter of Advice (LOA) should include an explanation of why the product selected best suits the needs of the body corporate.

It’s your right!

Managing agents should insist on receiving written advice annually, upon each policy renewal. This protects the broker, the managing agent, the trustees, and most importantly, the owners of the scheme.

A proper record of advice is a vital tool to ensure that the scheme’s insurance is handled correctly. Brokers are obliged to meet this important requirement. Below, via the blue button, managing agents or trustees can download a template letter to send to brokers who are not yet complying.