Financial advice, documentation and record-keeping requirements
Domain focus
Financial advice, documentation and record-keeping tests whether you can show what was recommended, why, and how the client's interests were protected.
Core rules
- Under the FMCA and the Code, advice must be suitable, explained clearly and recorded.
- A good file shows: client goals and needs, income and expenses, credit check, product comparison, recommendation rationale, disclosures, client acceptance and any conflicts.
- Record client instructions and any changes; do not rewrite history after a complaint.
- Retention: keep advice and compliance records for at least seven years under FMCA requirements; AML/CFT records generally at least five years.
- Privacy Act 2020 governs collection, use and storage of client information.
Worked example
A client complains that they did not understand the early repayment fee. The file contains only the signed contract. Reasoning: the lender or adviser cannot show that the fee was explained or that the advice was suitable; the missing record weakens the defence. A contemporaneous note of the explanation, the disclosure document and the client's acknowledgement would support compliance.
Traps
- Recording only the outcome, not the reasoning.
- Backdating or altering notes.
- Failing to retain disclosure and affordability records.
- Relying on memory in a dispute.
- Not recording client instructions that limit the advice.