Diploma of Financial Planning
Module 1 Workplace Simulation
Important assessment information
Aims of this assessment
This simulated workplace assessment activity is conducted to the standard expected in the workplace in order to demonstrate consistent performance of typical activities experienced in the financial services industry.
This assessment focusses on a real life scenario where a financial planning firm was taken to the Financial Ombudsman Service (FOS) as a result of a client complaint. This compliant arrived at the FOS after the adviser and client unsuccessfully attempted to navigate a solution via the internal complaints process offered by the financial planning firm. This assessment addresses the six steps of the financial planning process in the context of a client compliant. Using the case study from the FOS, it requires the six step process to be broken down in detail to identify where key communication and procedural obligations (if applicable) were (and were not) followed. Key areas of focus include the Financial Services Guide (FSG), Client Questionnaire, Risk Profile, Statement of Advice (SOA), Product Disclosure Statement (PDS), Authority to Proceed, and arrangements for review.
Marking and feedback
This assignment contains 1 assessment activity containing specific instructions.
This particular assessment forms part of your overall assessment for the following units of competency:
Grading for this assessment will be deemed “competent” or “not-yet-competent” in line with specified educational standards under the Australian Qualifications Framework.
What does “competent” mean?
These answers contain relevant and accurate information in response to the question/s with limited serious errors in fact or application. If incorrect information is contained in an answer, it must be fundamentally outweighed by the accurate information provided. This will be assessed against a marking guide provided to assessors for their determination.
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide standards provided to assessors. These answers either do not address the question specifically, or are wrong from a legislative perspective, or are incorrectly applied. Answers that omit to provide a response to any significant issue (where multiple issues must be addressed in a question) may also be deemed not-yet-competent. Answers that have faulty reasoning, a poor standard of expression or include plagiarism may also be deemed not-yet-competent. Please note, additional information regarding Monarch’s plagiarism policy is contained in the Student Information Guide which can be found here: http://www.monarch.edu.au/student-info/
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this assessment, you will be given one more opportunity to re-submit the assessment after consultation with your Trainer/ Assessor. You will know your assessment is deemed ‘not-yet-competent’ if your grade book in the Monarch LMS says “NYC” after you have received an email from your assessor advising your assessment has been graded.
Important: It is your responsibility to ensure your assessment resubmission addresses all areas deemed unsatisfactory by your assessor. Please note, if you are still unsuccessful in meeting competency after resubmitting your assessment, you will be required to repeat those units.
In the event that you have concerns about the assessment decision then you can refer to our Complaints & Appeals process also contained within the Student Information Guide.
Expectations from your assessor when answering different types of assessment questions
Knowledge based questions:
A knowledge based question requires you to clearly identify and cover the key subject matter areas raised in the question in full as part of the response.
Skill based questions:
Where you are asked to write as though you are speaking to a client, your answers must show your ability to:
Finally, good luck with your learning and assessments and remember your trainers are here to assist you J
FOFA – Dispute Resolution
Activity instructions to candidates
Module 1 covered the legal obligations and the six-step process financial advisers must follow when providing financial advice to clients. Not adhering to these obligations will inevitably lead to client complaints. Depending on the circumstances, this may lead to a range of adverse outcomes for an adviser. This includes monetary penalties, the AFSL withdrawing an adviser’s letter of authority that allows them to continue to work as an authorised representative, or in very serious circumstances, criminal charges being applied.
As indicated in the course materials, the Financial Ombudsman Service (FOS) is an approved external dispute resolution scheme approved by ASIC. Go to www.fos.org.au for more information. While seeking to resolve a client dispute internally is preferable compared to allowing a dispute to reach FOS, sometimes internal dispute resolution processes break down. It is at this point that every obligation you have learnt about in your studies will be analysed by FOS in detail in regard to the advice process.
At the end of this work place simulation, we have included a real FOS Case Determination between an aggrieved client and a financial planning firm. FOS protects the identity of both the financial planning firm and the client. Because the determination is a legal document, the client is called the “Applicant”, and the financial planning firm which stands for Financial Services Provider is referred to as “FSP”. You will see it also refers to the actual financial adviser as “Ms A”, and the actual clients as “Mr H” and “Mrs H”. The FOS determination is 10 pages in length. While the client was not successful in this FOS claim against the financial adviser or the firm, it illustrates very salient insight into why financial planners must follow their obligations so carefully. You must read this document in full in order to answer the questions in this assessment.
For your general interest, the FOS case number is 200885. If you ever want to source this case directly from FOS for any reason, it can be found by going to www.fos.org.au and searching under “Decisions” in the top right search section of the FOS homepage. You can then type in the Case Number.
First, you are to read carefully the FOS Determination (note: it is contained in Appendix 20 of the Module 1 course materials). Second, you are then required to answer the following questions in the context of the information you have learnt in Module 1.
1. Summarise the advice recommended by Ms A
Ms. A in the SOA had advised the client to invest their money in a multi- sector retail investment platform (“the investment platform”).
She had categorized the client as a ‘Moderately Aggressive’ investor & had taken the investment time frame as greater than five years and five to six years with a pre-defined clarification that past or current returns is no guarantee for the future.
2. Stipulate the date Ms A prepared the SOA, and the date the subsequent advice was actioned including the amount invested.
The SOA was prepared on : 18th April 2006
Actual actionable date (amount invested date) : 21th April 2006
Please note: Though the cheque was drawn on 20th April’2006; however, the following day i.e. 21st April it was deposited in to various managed funds. Hence, the amount investment date would finally be 21st April & not 20th April’06.
3. Summarise the client’s grievance
Following were the Client’s Grievances:
1. Inappropriate investment advice or ill-advised provided by Ms. A.
2. The level of services which were initially promised before concluding the sale was not adhered to. (As per the client, Ms. A had promised that she will review the investment on an ongoing basis & will regularly contact them so that they could meet to discuss any changes that she deemed necessary to the portfolio).
3. Just on a belief that Ms. A would provide the above level of services, they had mutually agreed to even raise their profile from “Moderate” to “Moderately Aggressive” otherwise they were far from being called as “experienced & aggressive investors”.
4. Client did not receive any FSG (Financial Services Guide).
5. Ms. A did not even mention the availability of ‘Service A’ when she recommended the portfolio.
6. Non-disclosure of Switching Fees.
7. Another grievance was that Ms. A made no attempts to resolve the complaints when the client had contacted her & had also started defending her actions.
8. Lastly, Ms. A calling them in response to their first complaint to FSP was ‘very unprofessional’, ‘unethical’ and ‘very confronting’.
4. List precisely what parts of the 6 Step Process Ms A followed (…or did not follow) based on your analysis of the case.
As per my analysis, following parts of the 6 steps process that Ms. A followed or did not followed:
1. She had gathered all the relevant data, circumstances & the risk tolerance level of the client’s to ensure that her advice should be in their best interest. As obligated by the law, she too provided them with FSG (Financial Services Guide).
2. She had clearly established goals and objectives of the client & recorded those in Fact Find too.
3. She had properly identified the Financial Problem of the client. The Client’s had migrated to Australia & while they applied for the citizenship, they were looking to invest the money which they had received from selling of their property based out of United Kingdom.
4. She had provided the client’s with SOA (Statement of advice) & as the SOA carried investment recommendations, she did provide a PDS (Product disclosure statement) to the client.
5. After receiving an affirmative from the client, Ms. A had implemented the agreed upon plan & had also taken the signature on Authority to proceed from the client which is a legally enforceable agreement demonstrating the client’s acceptance of the advice.
6. Lastly, Ms. A did mention of ‘Service A’ to the client in order to provide an ongoing service to do a review, revise & maintain the plan.
5. Important: The required minimum word length for this answer is 300 words. Refer to the “Reasons for Decision” section on page 5 of the FOS Determination. Summarise FOS’s decision, and make reference to the following issues:
FOS final decision of not to upheld the dispute was based on the merits by taking into account the facts of the case.
Client’s had portrayed lots of grievances against Ms. A & below are the final determination of the FOS on them:
A. FSG: As per the client, Ms. A did not provide any copy of the FSG (Financial Services Guide). However FOS found out that while signing Authority to proceed, Client’s had declared that they had received a copy of FSG. Hence the grievance was Null & Void.
B. Fact Find/ Client Questionnaire: As per the client, Ms. A gave an ill advice as their goal was to buy a house in a three years’ time. However FOS found out that the client had signed on the Fact Find as being Correct & there was no reference to purchase a home in that File Fact. Hence the grievance was Null & Void.
C. Risk profile: As per the client, Ms. A did not do a right Risk Profiling for them. However FOS found out that both risk profile & objectives were clearly mentioned on Page 1 of the SOA & in signing the Authority to Proceed, client’s had declared that they had ‘read & understood’ the SOA. Even if they did not have sufficient time to carefully read the SOA on the day they signed the Authority to proceed, they had ample opportunity to read it later & raise any concerns about its content with Ms. A or FSP, but they didn’t do for 3 years. Also, FOS believed that Risk profile as recorded was appropriate as the clients were employed on middle income levels & have no dependent too. Hence the grievance was Null & Void.
D. Statement of Advice: As per the client, Ms. A did not provide the appropriate advice. However FOS found out that Ms. A did inquire & determine client’s personal circumstances, did investigate about the recommended product & provided PDS too. Client had signed an Authority to proceed after carefully understanding the recommended investments in SOA. Hence that inappropriate investment advice grievance was Null & Void.
E. PDS: As per the client, Ms. A did not tell about the switching charges. However FOS found out that there were no switching charges & the same was clearly mentioned on the PDS given to the client. Hence the grievance was Null & Void.
F. Authority to Proceed: As explained earlier, Authority to proceed was signed by the client where it was mentioned that FSG was provided & that they have read Terms & conditions of SOA.
6. Refer to “Step One” of the six-step financial planning process outlined in the course materials - specifically the sub-heading titled “capturing a client’s risk tolerance” and “what is the client’s real risk profile”. Explain what practical measures you think Ms A could have undertaken so that Mr and Mrs H understood the risks of Ms A’s recommended investment portfolio better?
Measures that Ms. A could have taken:
1. She could have explained to them in detail that both of you are presently employed on the middle income levels with no dependents. Hence, you could take some risks with their money & it would be a prudent to surge their risk potential from Moderate to Moderate Aggressive level.
2. She could have candidly explained to them that the investment that she has recommended could get down to any level & can even erode their capital too (if markets didn’t perform/ global melt down etc). By hearing this, client could have easily understood about the risks attached with the investment.
3. She could have mentioned at the starting only that the Ups & Down are a part & parcel of this kind of investments. Hence they should not lose the patience in a short term.
7. Refer to “Step Six” of the six-step financial planning process outlined in the course materials. Explain why you think FOS made a finding that despite Ms A not reviewing Mr and Mrs H’s portfolio, Ms A was not at fault. Explain in the context of the purpose of reviewing, revising and maintaining a financial plan.
FOS finding says Ms. A was not at fault due to following reasons:
Firstly, the client’s did not avail to any kind of ‘Service A’ which was initially offered to the client for the ongoing reviewing, revising & maintaining of financial plan services. This is due to the reason that there is a cost that was attached to such kind of services (minimum $ 1100 per annum).
Secondly, there is no evidence on the file that Ms. A had promised the client’s that she would contact the client every three months (or sooner) for any kind of review.
Thirdly, if the clients were so concerned about the ongoing services which they were not getting from Ms. A, why did not they do more than just ‘a few phone calls & messages to Ms. A’ for over 3 years.
Lastly, even if Ms. A had been in more regular contact with the client for reviews, she would have advised to continue to hold the investments in falling markets as these are part & parcel of market linked investments.
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