Client Communication, Ethics and Professional Standards
This domain tests conduct under pressure: whether you disclose conflicts before advice is given, keep client information confidential, stay inside your competence, and record what the client actually instructed.
The fiduciary core
A fiduciary acts with loyalty (client interest first), care (the diligence of a competent professional) and disclosure (all material conflicts, in writing, in advance). Suitability is a lower bar: a suitable product can still breach loyalty if it pays the adviser more than an equally suitable alternative. Where the standard is suitability rather than fiduciary, disclosure of compensation remains mandatory.
Communication that survives scrutiny
Use active listening and plain language; check understanding by asking the client to restate the recommendation. Document the client's goals in their words, the options presented including the rejected ones, and the reasons for the chosen path. When a client insists on a course you consider unsuitable, record the advice given, the client's instruction, and any limits on your responsibility - a documented objection is not a substitute for refusing an illegal instruction.
Worked example
A client wants to invest 200,000. Product X pays a 3% commission and fits the IPS; Product Y pays 1% and fits equally well. Under a fiduciary standard, the adviser must present the lower-cost option or justify the higher one on documented client benefit. Choosing X silently is a conflict breach even though X is suitable, because the conflict was undisclosed.
Boundaries
Decline matters outside your competence or licence and refer. Protect confidentiality, including from family members without authority. Keep records for the required retention period. Acquired through an unlicensed referral partner, a client relationship is still yours to service compliantly.
Traps
- Disclosing a conflict after the transaction.
- Accepting verbal instructions on material changes.
- Discussing a client's affairs with an adult child who is not authorised.