Client onboarding, suitability and disclosure
Onboarding is where the exam tests the link between what you know about a client and what you are allowed to recommend. Expect questions on information gathering, suitability, the content and timing of disclosure, record keeping, and anti-money-laundering obligations.
Know your client
The Code's client-care standard requires you to exercise care, diligence and skill and to ensure advice is suitable. In practice that means gathering the client's financial situation, goals, time horizon, existing products, risk tolerance and knowledge or experience. Risk-tolerance questionnaires are inputs, not answers: the suitability judgement is yours and must be recorded with reasons.
Disclosure
The FAP disclosure information must cover the nature and scope of the advice, fees and how the adviser is paid, conflicts of interest, the complaints process and dispute resolution scheme details. Product-level disclosure is delivered by the issuer's Product Disclosure Statement, which you should point the client to rather than paraphrase.
AML/CFT and records
The Anti-Money Laundering and Countering Financing of Terrorism Act 2009 requires customer due diligence: identity verification, beneficial ownership for entities, and enhanced due diligence for politically exposed persons or higher-risk situations. Advice records must be retained - assume a seven-year retention expectation for client and transaction records.
Worked example
A 58-year-old wants to retire at 60 and asks for a global equity fund. The fund's volatility is inconsistent with a two-year drawdown. You document the mismatch, recommend a shorter-duration bond allocation for the near-term spend, and keep equities only for the longer horizon. The file shows the reasoning, the alternatives discussed and the client's decision.
Traps
Relying on a risk score alone. Giving advice without recording why it suited the client. Reusing last year's disclosure. Treating PDS content as your own advice.