“Clients are more likely to read your documents if they are short and easy to understand”
Strategi is urging advisers to build compliance “into every step of the advice process,” and says that one of the biggest challenges advisers now face is setting up a compliant business while also keeping their processes and documents simple.
Executive director David Greenslade said it has been “great to see so many financial services firms embracing the new regime,” rethinking their processes, and making improvements. He said one of the key things to get right is information disclosure, and offering documents that disclose all of the key facts while also being easy for clients to read and understand.
“We often see advice documents that appear to be designed to cover the butt of the organisation, rather than simply and succinctly explain what is being recommended,” he said.
Read more: Does your brokerage have a "repeatable" online process?
“When building a new advice process, consider your client demographics, how they engage with you, how they prefer to receive advice, and the relative complexity of the product being recommended.”
“Clients are more likely to read your documents if they are sufficiently short and easy to understand,” he explained.
“A good starting point is to write how you would talk in real life. This will keep your documents relatable, easier to understand and will help eliminate unnecessary jargon.”
Greenslade noted that it is also important to maintain balance when offering advice around specific products, and to always provide full disclosure on their risks as well as their benefits. He said he’s seen advisers avoid disclosing risks for fear of losing the sale, but that this would be a clear breach of the Code of Conduct.
“If you’re going through a product and its key features, benefits and why it’s suitable, you also need to be able to talk about the key risks and disadvantages so that the client understands the pros and the cons of the recommendations,” Greenslade said.
Read more: Kiwis with advisers end up significantly better off - research
“When we look at documents, we often have to say ‘look, you haven’t put anything here about the key risks and disadvantages.’ And their reply is often, sadly, ‘that’s because we don’t want to scare them away.’ You need to have a balanced approach, and that’s really hard-coded into the Code of Conduct.”
“You need to provide sufficient information to enable a client to make an informed decision,” he added.
“However, this does not mean you need to drown them in facts and figures. Just make sure they know where the supporting information is, so they can read it if they want to.”
