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Feeling confused about when and what disclosures should be given to clients who you engaged with before March 15th? Don’t worry, you’re not alone.  We recently held a webinar for our adviser businesses to explain our interpretation of an advisers disclosure obligations under the new financial scheme (Financial Services Legislation Amendment Act 2019). While the new disclosure requirements are clear about what is required when advisers engage with new customers after March 15th, we found there was still some uncertainty for advisers about what they should do for their existing customers and for those customers that began the advice process prior to March 15th that are yet to complete. To recap, there are now four times that disclosure must be given:
  • Disclosure 1: Your publicly available disclosure which must be available at all times to the public
  • Disclosure 2: when the nature and scope of advice is known
  • Disclosure 3: when advice is given
  • Disclosure 4: when a complaint is received.
Disclosure can now be provided in your choice of format. Historically disclosure was required to be in writing and to be signed by the customer. As there is now no specific requirement for disclosures to be signed you might choose to provide disclosure 2 and 3 verbally,  in an email or by letter. However, you need ensure that there is evidence that the customer has received and understood your disclosure. You also need to think about how you retain your records if you use means that are not in writing. We think that one of the nicer features of the new disclosure requirements is that they can be included into other documents that you provide to your client. For instance, disclosure 2 could form part of a letter of engagement or scope of service agreement and disclosure 3 could be included in your risk plan or implementation letter. This helps integrate disclosure into your advice and sales process rather than making it a separate formal process which can feel disconnected from your customer engagement. Remember, it’s important to ensure that the disclosure components are clearly able to be distinguished from your advice and that no matter what method you use, your disclosures are concise and easy to understand. So, what about disclosure in practice for existing customers that wish to make small changes? Our view is that in this instance, clients should be directed to your public disclosure and then provided with disclosures 2 & 3 with the acknowledgment of changes made and any potential impacts these changes might have to your previous advice or to their current policies. How does disclosure in practice work for customers straddling March 15th? If they are in the need’s analysis, consultation or statement of advice phase, we recommend disclosure 2 is provided now and then disclosure 3 provided once you and the client have agreed are their requirements along with your specific product recommendations. For those clients already at the implementation stage i.e. in underwriting it may be appropriate to provide disclosure 2 and 3 at the same time and before the policy is issued. Remember, disclosure information doesn’t need to be replicated -so information you provided in disclosure 2 does not need to be replicated in disclosure 3. But if there have been material changes to your situation in relation to the things you are required to disclose and these have occurred at any time during the advice engagement we believe you should update and provide the relevant disclosures to the client highlighting the changes. Please note: This article is an overview of a training and coaching webinar created and facilitated by Cecilia Farrow. If you are interested in learning more about membership benefits click here, or connect with us here.  All our training, coaching and mentoring is tailored to build our members knowledge and skills to exceed their professional goals and to be a recognised, respected and trusted adviser. This article was co-written by Sarah-may Butterfield, Relationship Manager at FAP Services Limited and Cecilia Farrow, Managing Director and Founder of FAP Services Limited and TripleJump Group Holdings Ltd.

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Disclosure for articles written by Cecilia Farrow:  

Cecilia Farrow, the Founder and Managing Director of the FAP Services Network, has committed the past 25 years of her working life to establishing herself as an expert in the Life, Disability and Health risk management sector in Business and Personal Risk.

Cecilia Farrow is associated with Thrive Consulting, Triplejump and is the Member Director for Risk on the Financial Advice New Zealand Board.

The views expressed in this article are solely hers and are not intended to represent the views of Financial Advice New Zealand.