Deck 15: Development of a Statement of Advice

Question 1

When is a statement of advice (SOA) required?

A) A financial planner must provide the client with a SOA at the same time as, or as soon as practicable after, the advice is provided.
B) A financial planner must provide the client with a statement of advice SOA within 21 days after, the advice is provided.
C) A financial planner is not under an obligation to provide written advice to the client.
D) None of the above.

Answer 1

A

Question 2

An SOA is not required in circumstances including:

A) when providing personal advice to clients having a relatively small amount of funds to invest (less than $15,000).
B) where the advice does not involve the purchase of a financial product and where the entity providing the advice does not receive any remuneration.
C) both a and b
D) none of the above.

Answer 2

C

Question 3

An SOA must:

A) tailor advice to the needs of the client.
B) incorporate the level of the client's financial literacy in its presentation.
C) assess the complexity of the advice provided.
D) all of the above.

Answer 3

D

Question 4

The 'know your client' process is integral to:

A) risk profiling.
B) the type of remuneration method to charge the client.
C) whether the client is classified as a retail or wholesale client.
D) all of the above.

Question 5

The three types of SOAs used by financial planners are typically the:

A) small investment plan, further advice plan and a comprehensive plan.
B) no-advice plan, limited SOA and a comprehensive plan.
C) no-advice plan, further advice plan and a comprehensive plan.
D) both a and b

Question 6

The balance sheet, income statement and cash flow statement are examples of:

A) economic indicators.
B) financial ratios.
C) personal financial statements.
D) technical analysis.

Question 7

In relation to which document supplied by the financial adviser does the ASIC apply the test of what a person would reasonably require for the purpose of making a financial decision?

A) FSG
B) SOA
C) Limited financial plan
D) All of the above

Question 8

Consistent with RG 168, when documenting the SOA financial planners should:

A) use the language of the Corporations law.
B) use plain English consistent with the language of the client.
C) note that the central focus of the SOA should be the client and not the financial planner's range of technical skills.
D) both b and c

Question 9

Acting in the best interests of the client is required of the financial planner by the:

A) Corporations Act for all financial product recommendations to clients over a minimum value of $25,000.
B) Financial Planning Act for all financial advice recommendations to clients over a minimum value of $25,000.
C) Financial Planning Association for all financial advice recommendations to clients where practical to do so.
D) none of the above.

Question 10

Problems or conflicts that may arise between the client's goals and the potential strategies and recommendations provided by the financial planner include:

A) analysing opportunity costs.
B) decisions about priorities.
C) confronting ethical issues.
D) all of the above.

Question 11

A record of advice (ROA) can be used in place of an SOA where the total investments to which the advice relates is:

A) less than $5 000.
B) less than $15 000.
C) between $10 000 and $32 500 when expressly agreed to by the client.
D) none of the above.

Question 12

The legislation that specifically sets out how organisations should collect, use, keep secure and disclose personal information is the:

A) Corporations Act.
B) Privacy Act.
C) Income Tax Assessment Act.
D) none of the above.

Question 13

Examples of assumptions that are often required to be made by the financial planner in the preparation of a SOA include those relating to:

A) tax rates.
C) age of the client.
C) age of the client.
D) both a and c

Question 14

When implementing agreed-upon recommendations in the SOA, the financial planner:

A) must obtain the signature and consent of the client prior to implementation.
C) both a and
C) both a and c
D) is unlikely at this point to indicate clearly the responsibilities of each party or a time line for implementation.

Question 15

Prior to engaging the services of a financial planner, an introductory meeting between the financial planner and the client is normally arranged and serves a number of purposes including to:

A) establish the relationship between the planner and the client.
B) provide the planner with an opportunity to learn about the client, the client's cir?cumstances and needs and to determine what the client is hoping to accomplish from the relationship.
C) provide the client with an opportunity to learn about the planner and the services they offer and whether the planner is likely to be able to satisfy the client's requirements.
D) all of the above.

Question 16

The financial planner has a part to play in preventing and detecting:

A) money laundering activities.
B) infectious diseases.
C) terrorism activities.
D) both a and c

Question 17

The best interest obligations:

A) require the financial planner to demonstrate compliance and can include providing supporting documentation as to how the recommended financial products were suitable for the client.
B) include an expectation that the client is given 'perfect advice' in accordance with RG 175.
C) include an expectation that the client is given 'reasonable advice' in accordance with RG 175.
D) both a and c

Question 18

A sunset clause in a SOA represents:

A) the date beyond which the provided recommendations will no longer remain valid.
B) a period during which further investments can be placed at a reduced transaction fee.
C) the maximum period after which the financial planner cannot be sued for negligent advice by the client.
D) an acknowledgement by the financial planner that they have the necessary licence to operate in this capacity.

Question 19

Financial advisers are legally required to disclose their fees, costs, benefits, charges and interests in the form of a:

A) percentage.
B) dollar amount.
C) either a or b.
D) both a and b.

Question 20

A limited advice plan:

A) considers all aspects of the client's personal circumstances, needs and objectives.
B) is also termed scaled advice.
C) is often sought and requested by clients seeking financial advice on a particular issue or specific circumstances, for example research on a particular product, investigation into negative gearing strategies, or salary packaging.
D) both b and c

Question 21

How can the financial planner/licensee and/or product issuer use the information included in RG 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) to assist in their operations including dealings with clients?

Question 22

Given that there is no set rules as to the length of the statements of advice (SOA) provided by the financial planner to the client, discuss relevant issues that need to be considered by the planner in the preparation of the SOA.

Question 23

Provide an outline of the best interest obligations for financial planners adopted as part of the government FOFA reforms into the financial planning industry.

Question 24

Briefly discuss the type of language that should be used by the financial planner when discussing issues with clients and in the formal preparation of the SOA.

Question 25

Discuss the form and extent of remuneration disclosure that applies to financial advisers.

Question 26

In what circumstances can a record of advice (ROA) document be prepared for a financial planning client and what format does the financial planner need to follow in its preparation?

Question 27

(a) Using examples, differentiate between a comprehensive financial plan and a limited advice plan as the 2 principal types of SOA documents the financial planner is expected to provide to clients.
(b) What is an alternative SOA document to those discussed above that is sometimes prepared by the financial planner in particular circumstances?

Question 28

As an industry seeking to refer to its participants as professionals in their field, with a high level of ethical and moral principles, provide examples as to how the key attribute of trust is important in the client - adviser relationship in the financial planning industry.

Question 29

Typically the financial planner will need to make a number of assumptions in the preparation of a comprehensive and detailed SOA. Provide details as to some of the assumptions used by the financial planner including the basis for the relevant amounts.

Question 30

Discuss the importance of maintaining security over client records and what levels of internal controls a financial planning firm could maintain to ensure such levels of security.