MenuFAAA Principles of Good Professional Practice
Stage 2 - Researching the client's circumstances
Stage 2 of the financial advice process – Researching the client’s circumstances – is about ensuring you have a full picture of the client’s situation. At this stage, financial advisers work with the client to identify their personal and financial goals, gather accurate and complete factual data (like income, assets, liabilities), and collect qualitative insights (like values, attitudes toward money, and financial literacy)13.
The aim is to build a solid understanding of the client’s needs and priorities so that any advice or recommendations are relevant and well-informed. It is possible that the scope of advice will need to be revisited at this stage, and – with the client’s informed consent – may need to be amended. The adviser should ensure that the client understands the importance of providing all the relevant information about their personal circumstances and needs.
The FAAA Principles of Good Professional Practice booklet is also available to download.
Outcomes
1. Working with the client, define their financial situation, their needs and their objectives, and based on these agree the client’s goals.
2. Help the client prioritise these with reference to:
- Need
- Time frames
- Client preferences
3. Obtain the information relevant to the agreed scope of advice:
- This should include sufficient supporting or corroborative information to allow the adviser to safely conclude that the scope of advice is appropriate.
4. Review the information provided and work with the client to identify and resolve any:
- Inconsistencies
- Omissions
- Unrealistic client expectations
5. Be satisfied the client understands the correlation between the quality of the information provided and the quality of the advice provided.14
6. Assist the client to be able to make an informed decision by providing the necessary information and education in relation to the subject matter of the advice.
7. For each financial need and objective:
- Identify your client’s:
- Capacity for risk (including but not limited to investment risk)
- Attitude to risk (including but not limited to investment risk)
- Be sure your client understands:
- The difference between attitude to risk and capacity for risk
- How this will be reflected in your advice.
The FAAA Principles of Good Professional Practice booklet is also available to download.
13 FPSB Standards 4,5,6
14 s961B(2) (a) –(c); RG 175.288(c)
Please note
These principles are intended as a foundation on which advisers can develop their own approach to best practice. This guidance is not exhaustive and is not intended to prescribe how advice must be provided. It outlines principles of good practice and the outcomes they are intended to achieve, rather than specific actions.
Advisers must apply their own professional judgement when using this material, taking into account the needs and circumstances of their clients, relevant legal and regulatory obligations, and any licensee requirements.
