1. What is a Record of Advice?

A Record of Advice (ROA) is a simple record that confirms the advice provided by an advice licensee or an adviser. The ROA is similar to a Statement of Advice (SOA) but shorter and less formal. It is often given to existing clients to confirm changes to, or implementation of, advice that has been provided in a previous SOA.

2. When can I use an ROA instead of giving a client an SOA?

You can use an ROA instead of giving a client an SOA in four separate advice situations: see Table 1.

Table 1: Four separate advice situations where an ROA can be used

Note: For more information about other situations where an SOA is not required, see Regulatory Guide 175 Licensing: Financial product advisers—Conduct and disclosure (RG 175) at RG 175.176.

3. Does an ROA need to be in writing?

You can keep an ROA as an audio or video recording, or in writing: see Question 6.

Tip: When considering using templates and preparing ROAs, you should consider presenting the information in a way that is easy for the client to access, digest and understand. If using audio or video recordings, you should think about how you will remember to capture all the information that must be included in an ROA: see Question 4.

4. What information do I need to include in an ROA?

This varies depending on the situation in which you are using an ROA: see Question 2 and Table 2.

In most cases, as a minimum, the ROA will need to cover your recommendations, and the basis for the recommendations (i.e. your reasoning). You must also give your clients information about any potential conflicts: see Question 5.

Table 2: What must be included in different situations when an ROA is required

Note 1: In ‘further advice’ situations, the ROA must include either your advice or a brief description of your recommendations to the client and the basis for the recommendations (i.e. your reasoning). Only one is required. See RG 175.182 for more information about the ROA content requirements for further advice. We consider that you will normally satisfy the requirement to set out a brief description of your recommendations to the client and the basis of advice required by regulation 7.7.09(1)(b), if the ROA clearly and unambiguously sets out the advice provided to the client and also includes either:

• a summary of the client’s relevant circumstances, or
• a clear statement that information about the client’s relevant circumstances is set out in a previous ROA or SOA provided to the client. The ROA or SOA should be identified by date.

Note 2: In ‘further advice’ situations, you must give the client information about potential conflicts and you can demonstrate through other records on the client’s file that you have given the client this information, without including this information in the ROA.

5. What information do I need to give clients about potential conflicts of interest?

You should give your clients information about the remuneration, commission and other benefits that you and other persons will receive for the advice, that could influence or be capable of influencing you. ‘Other persons’ include: the providing entity, its employer, its related body corporates, authorising licensee, their directors or employees and their associates: see sections 947B(2)(d) and 947C(2)(e).

However, you do not need to provide information if the remuneration, commission or other benefit:

• does not depend on whether the client follows the advice (e.g. an hourly fee paid by the client that is payable even if the client doesn’t follow the advice)
• is rebated in full to the client, or
• was not known by you (or could not reasonably be expected to have been known).

You must also give details of any interests, associations or relationships that could influence or be capable of influencing you in providing the advice. For example, you may be affiliated with a product issuer or an underwriter. If the affiliation might reasonably be expected to be capable of influencing you to provide favourable advice about the financial products of the affiliated party, the affiliation must be disclosed to the client.

You can give information about potential conflicts to the client verbally or in writing (or a combination of the two): see Question 4 on whether this information must be included in the ROA.

Generally, information about costs, fees, charges, expenses, benefits and interests must be stated in amounts in dollars.

Note 1: RG 175 provides information about disclosure of potential conflicts of interest at RG 175.183(f) and (h) and RG 175.195–RG 175.212.

Note 2: For further guidance on the dollar disclosure provisions and ASIC relief, see RG 175 at RG 175.205–RG 175.206 and Regulatory Guide 182 Dollar disclosure (RG 182).

6. Do I need to give the ROA to my client?

Sometimes. It will depend on the particular advice situation: see Table 3.

Table 3: Do I need to give the ROA to my client?

Tip: Even if you do not have to give the ROA to your client, you may choose to do so. You should consider the complexity of your advice and whether giving your client a copy of the ROA will help them to better understand your advice.

7. When do I need to give the ROA to my client?

If you give small investment advice to a client, you must give a copy of the ROA to the client:

• when you provide the advice to the client, or as soon as practicable after providing the advice, and
• in any event – before you provide any further financial service related to the advice: see regulation 7.7.09A(10).

For time-critical cases of small investment advice, you must give the client the ROA:

• within five days after providing the further service (or sooner if practicable), or
• if a cooling-off period applies to the further service under section 1019B because the client acquires a product – before the start of the 14-day period applicable under section 1019B(3) (or sooner if practicable).

A case is time critical if the client expressly instructs that they require a further financial service to be provided immediately, or by a specific time. See RG 175.174–RG 175.175 for information about delayed provision of SOAs in time-critical cases.

For further advice or no buy or sell product advice, if a client requests a copy of an ROA you must comply with the request: see regulations 7.7.05 and 7.7.08.

Tip: If a client requests a copy of an ROA, you should give the client a copy as soon as practicable after receiving the client’s request.

8. What are the record-keeping obligations for ROAs?

An AFS licensee should ensure that ROAs are kept for a period of at least seven years after the day the personal advice is provided to the client: see regulations 7.7.09(3), 7.7.05 and 7.7.08 and Pro Forma 209 Australian financial services licence conditions at condition 52(b) and (c).

You must also keep records of the information you have relied on, to demonstrate that you have prioritised the client’s interests when giving personal advice: see section 912G(7) as inserted by Class Order [CO 14/923], and RG 175.400–RG 175.404.

Note: For more information about record-keeping obligations that apply to personal advice, see RG 175.427–RG 175.432.

Tip: You should keep appropriate records that will demonstrate that you have acted in the best interests of your client and that the advice is appropriate. Such records will typically include more than just the advice documents (i.e. ROAs and SOAs) on the client’s file.

9. When giving further advice, when will a client’s relevant circumstances be ‘significantly different’?

If the client’s relevant circumstances at the time you provide further advice are significantly different from the circumstances that you considered when providing the previous advice, you cannot use an ROA and must give the client an SOA for the further advice: see regulation 7.7.10AE(2)(b).

You will need to exercise your professional judgement when considering whether any of your client’s relevant circumstances are significantly different from when the previous advice was given.

Examples of relevant circumstances that may be considered significantly different include:

• a new mortgage or significant increase or decrease in debt
• divorce or separation from a partner
• a new baby
• significant home renovations
• redundancy or job loss
• a significant increase or decrease in income
• inheritance
• sale of business
• significant health events (i.e. terminal illness, disability or trauma)
• retirement
• death of a partner, and
• a move to aged care.

Examples of relevant circumstances that may not be considered significantly different are given in Table 4.

Table 4: Examples of when changes to a client’s relevant circumstances may be significant

Note 1: The examples in Table 4 are just examples. Each client’s relevant circumstances will be different and you will need to exercise your professional judgement.

Note 2: See our example ROAs, listed under Where can I get more information?, which provide examples of when a client’s relevant circumstances are ‘significantly different’.

10. When giving further advice, when will there be a significant difference in the basis of the advice?

If the basis for your further advice is significantly different to the basis on which the previous advice was given, you cannot use an ROA and must give the client an SOA for the further advice: see regulation 7.7.10AE(2)(c).

You will need to exercise your professional judgement when considering whether the basis for your further advice is significantly different from the basis of the previous advice.

Tip: If a change in the basis of your further advice introduces a new advice area or strategy, it is likely to be significantly different and an SOA will be required.

Examples of further advice with a significantly different basis from the previous advice are given in Table 5.

Table 5: Examples of further advice with a significantly different basis

Note: For ASIC guidance on the advice and the basis for the advice for SOAs, see RG 175.191–RG 175.194

11. Can I give my client further advice if I last gave my client an SOA six years ago?

The law does not specify how often an SOA must be provided to a client. Rather, it depends on whether the client’s relevant circumstances and the basis for the advice are significantly different from the last time you gave the client an SOA: see Question 2.

It will ultimately depend on each individual client’s circumstances, and you must exercise your judgment to determine whether the client’s circumstances are significantly different from when you prepared the client’s last SOA.

You should make reasonable inquiries in relation to these matters. For example, you may choose to ask your client whether they have experienced any of the events set out in the response to Question 9.

Tip: The records contained in the client’s file should show the inquiries you have made and demonstrate why the client’s circumstances are not significantly different. If the previous SOA was provided more than seven years ago, and you satisfy the further advice requirements, you should retain a copy of the SOA as part of your record keeping on the client’s file: see Question 8.

12. I’ve changed licensees, and want to give my existing clients further advice. Can I rely on a previous SOA I gave my clients while authorised by my old licensee, or do I need to give clients a new SOA under my new licensee?

It will depend on whether you were the ‘providing entity’ who gave the previous SOA to your clients while authorised by your old licensee: see Table 6.

The disclosure obligations in Part 7.7 of the Corporations Act apply to ‘providing entities’. Providing entities may be AFS licensees or authorised representatives. Authorised representatives can be individuals or corporate authorised representatives. Representatives, such as employed advisers, that are not authorised representatives are not providing entities.

Where financial product advice is provided by:

• a licensee (e.g. through one of its employees) – the licensee is the providing entity
• an authorised representative – the authorised representative is the providing entity.

If you were the providing entity who gave the previous SOA to your clients, you will meet the first condition of regulation 7.7.10AE(2)(a) which states that a providing entity does not have to give a client an SOA for further advice.

However, if you were not the providing entity who gave the previous SOA (e.g. you were an employed adviser under your old licensee), you will not meet the ‘providing entity’ condition of regulation 7.7.10AE(2)(a) and you will need to give your clients a new SOA before you can use an ROA for further advice.

For example, if a corporate authorised representative was the providing entity under its existing AFS licensee, it could give clients an ROA for ‘further advice’ situations because it remains the providing entity under the new AFS licensee.

Table 6: Examples of who is a providing entity when giving further advice

ASIC has the power to grant exemptions and modifications from requirements of Part 7.7, including the obligation to provide an SOA under sections 946A and 946B: see section 951B.

In limited circumstances, ASIC has granted relief to providing entities from the requirement to give an SOA to existing clients for further advice where there was a change of providing entity, but the adviser remained the same.

For information on how to make an application for relief, see Regulatory Guide 51 Applications for relief (RG 51).

13. A colleague has suggested I draft SOAs that include a broad range of topics so I can give ROAs for further advice on these advice topics (provided the client’s relevant circumstances are not significantly different from their last SOA). Is that okay?

An SOA should not cover broad topics and include generic information for the main purpose of satisfying the requirements to use an ROA instead of an SOA in future. Such deliberate conduct may:

• be contrary to your obligation to present SOAs in a clear, concise and effective manner (see sections 947B(6) and 947C(6), RG 175.185 and RG 175.213–RG 175.217)
• not be acting in the client’s best interests in relation to the advice (see section 961B and RG 175.252–RG 175.276)
• be a breach of the Financial Planners and Advisers Code of Ethics (Standard 1), or
• mislead or deceive the client (see section 12DA of the Australian Securities and Investments Commission Act 2001, RG 175.307 and RG 175.317).

14. How does ASIC consider an ROA when conducting advice file reviews?

When reviewing advice for compliance with the law, ASIC asks AFS licensees to produce a client’s file. We do not look at an ROA in isolation. We will consider the full client file produced to ASIC as a whole including any ROAs and SOAs and all of the supporting client records: see RG 175.427–RG 175.442.

We review the advice against the legal obligations in force at the time the advice is given.

For example, some of the legal obligations ASIC considers compliance with include:

• the disclosure obligations for potential conflicts of interest in section 947B(2)(d) and (e), or section 947C(2)(e) and (f) as the case requires
• the ‘switching advice’ requirements in section 947D
• the Financial Services Guide obligations in Division 2 of Part 7.7, and
• where applicable, the ongoing fee arrangement obligations in Division 3 of Part 7.7A: see Information Sheet 256 FAQs: Ongoing fee arrangements (INFO 256).

The best interests duty and related obligations in Division 2 of Part 7.7A require advice providers, when providing personal advice to clients, to:

• act in the best interests of their clients (see section 961B and RG 175.252–RG 175.371)
• provide appropriate advice (see section 961G and RG 175.372–RG 175.395), and
• prioritise the client’s interests (see section 961J and RG 175.400–RG 175.421).

Tip: You should ensure you maintain good records. This will help demonstrate that you have satisfied your obligations. Your records may take various forms and do not have to be paper based.