ADVISING ON PLATFORMS ISN’T JUST ABOUT PRICE.

Super and investment platforms aren’t all the same, and your advice shouldn’t be either. All too often financial advisers focus solely on price, which means you may not meet your legal obligations and fail to properly address the needs and objectives of your clients.

In this paper we wrote with Netwealth, we discuss how the best interests duty applies to the selection of a superannuation or investment platform for a retail client. There has long been a tendency for advisers to let the price of a platform determine their recommendation, rather than looking at the needs, objectives and preferences of their clients. This pattern of conduct has no doubt been driven by the relentless focus on the financial advice industry by ASIC, the Banking Royal Commission and Treasury.

The issue with focusing on price alone is that platforms are not just technology solutions, they’re financial products. This means that you’re providing financial product advice each time you advise a client on which platform they should invest through. With financial product advice comes a range of legal obligations (in the Corporations Act and, more recently, the FASEA Code of Ethics) that require you to ensure your advice is appropriate and in the best interests of your client.

When recommending a financial product to a retail client you are required to do a range of things including:

• Act with integrity and in the best interests of your client;
• Capture the client’s needs, objectives and preferences and base your recommendation on those needs, objectives and preferences;
• If there is a conflict, prioritise your client’s interests above your own;
• Ensure your recommendation is appropriate for, and adequately addresses, your client’s needs, objectives and preferences;
• Form a view as to whether the recommendation is likely to leave the client in a better position;
• Satisfy yourself that your client understands the benefits, costs and risks of your recommendation; and
• Satisfy yourself that the costs of the recommended product are fair and reasonable, and represent value for money for your client.

These adviser obligations make it almost impossible for you to apply a blanket rule to all clients. Every client is different, and you must tailor your platform recommendation to the specific needs, objectives and preferences of each client.

Price will always be a relevant consideration when it comes to choice of platform, but it will rarely be the only consideration. A wide range of factors can affect what is most appropriate for a client including their age, life stage, attitude towards advice, level of financial and digital literacy and desire for specific platform features.

By following a robust advice process, you can ensure that you meet your legal obligations and place your client in the most suitable platform available. We explain what a robust advice process looks like in this paper, including case studies to illustrate how the law is applied in practice.

If you’d like us to review your advice process or you need further guidance on how to meet the best interests duty, get in touch. We’d be happy to help.

Simon Carrodus, Michele Levine

December 2020