“People are people, and sometimes it doesn’t work out; nothing we say is gonna save us from the fall-out” – Taylor Swift’s “Afterglow.”

Maintaining compliance and delivering great advice to clients are paramount concerns for AFS Licensees and advisers. Although advisers may disagree, regular, high-quality file reviews are essential for ensuring that advisers and representatives comply with the law and their professional obligations.  

This article complements Compliance 101: Reviews and presents a practical checklist of 15 critical items to guide your review of personal advice files, adapted from ASIC’s Appendix 3 to Report 515. This checklist is designed to be clear, actionable, and focused on ensuring that your advice processes meet high compliance standards and client value. Hopefully, you’ll find it delivers in those respects. 

Why File Reviews Matter

They may be an imperfect control, but file reviews are a cornerstone of compliance, supporting the detection of deficiencies and enhancing the quality of advice provided to clients. In our experience, properly executed reviews can:

• Identify potential compliance gaps early, allowing corrective actions to be taken.
• Demonstrate adherence to legal obligations.
• Enhance client trust by ensuring their best interests are always at the forefront of advice.

Simplified Checklist for Conducting High-Level File Reviews

Below is a streamlined version of the critical components that licensees and advisers should consider when reviewing personal advice files.

You may not be a compliance expert, but using this simplified tool, a client identified an experienced adviser’s non-compliance with the Best Interests Duty, avoiding potential complications and compliance issues by addressing these failures early.

It’s not a substitute for a professional review, but a valuable tool for operational staff making regular check-ins.

1. Acting in the Best Interests of the Client

• Question: Has the adviser acted in the best interests of the client?
• Consideration: Ensure the adviser demonstrates that the recommendation or services were in the client’s best interests. While it is often easier to show that the client is in a better position, it is essential to assess this in context and not simply presume that ‘better’ means lower costs.
• Reference: Corporations Act 2001 – Sect 961B
• Related Article: Intent, Process and Outcome: Assessing Best Interests – This article discusses the complexities of the Best Interests Duty, emphasising the importance of genuine client-focused actions over mere procedural compliance.

2. Identifying Client Objectives

• Question: Has the adviser identified the client’s objectives?
• Consideration: Objectives must be specific, measurable, and captured in the client’s own words. Effective objectives should focus on clear, tangible outcomes such as reducing debt, increasing retirement savings, or purchasing a property. Objectives differ from broader goals in that goals tend to be more aspirational, such as “achieve financial independence” or “improve financial security.” In contrast, objectives break these goals down into actionable, measurable targets.
• Reference: Corporations Act 2001 – Sect 961B(2)(a)
• Related Article: Nailed It!: Three Paths to Better Advice – This article explores effective methods for understanding and documenting client objectives to provide tailored financial advice.

3. Understanding Financial Situation and Needs

• Question: Did the adviser accurately identify and document the client’s financial position, including income, assets, liabilities, and goals?
• Consideration: This should be clear in the file notes and captured comprehensively in the Statement of Advice (SOA). File notes should include specific details such as the client’s financial position, discussions, decisions made, reasons behind those decisions, and any queries or concerns the client raises. Structuring file notes chronologically with bullet points for each essential element can enhance clarity and ensure that all critical information is easily accessible.
• Reference: Corporations Act 2001 – Sect 961B(2)(a)
• Related Article: “What the hell am I doing here?”: Goals, objectives and great advice – This article discusses the importance of distinguishing between goals and objectives and how this understanding enhances the quality of financial advice.

4. Subject Matter and Scope of Advice

• Question: Was the subject matter and scope of the advice adequately captured and aligned with the client’s objectives?
• Consideration: The scope should neither exclude critical matters nor be unduly limited. Critical issues include insurance needs, retirement planning, and significant life events such as purchasing a home or starting a family. To ensure the scope of advice is adequately broad, consider all facets of the client’s financial life that could impact their goals. This means paying attention to tax implications, estate planning, and potential risks. It’s essential to have a holistic view and avoid limiting the scope in ways that could leave significant client needs unaddressed.
• Reference: Corporations Act 2001 – Sect 961B(2)(b)(i)
• Related Article: Defined Scope Advice and BID – This article examines how defined-scope advice can align with the Best Interests Duty, emphasising transparency and informed consent.

5. Relevant Circumstances

• Question: Has the adviser considered all relevant circumstances disclosed by the client?
• Consideration: A thorough assessment may include age, family status, financial literacy, and other personal factors. These factors should influence the advice by ensuring it is personalised and aligned with the client’s situation. For example, a young client with a growing family may require different insurance coverage and savings strategies than a retiree with established assets. Similarly, a client with low financial literacy may need more straightforward educational advice than someone with advanced financial knowledge. Tailoring the advice based on these factors helps ensure that it is practical, understandable, and meets the client’s specific needs.
• Reference: Corporations Act 2001 – Sect 961B(2)(b)(ii)
• Related Article: Honesty, integrity and best interests – This article discusses the importance of considering all relevant client circumstances to uphold honesty and integrity in advice.

6. Addressing Incomplete or Inaccurate Information

• Question: Has the adviser identified and addressed gaps or inaccuracies in client information?
• Consideration: Ensure reasonable efforts were made to fill any gaps before proceeding. Reasonable efforts may include requesting additional documentation from the client, clarifying ambiguous information through follow-up questions, and cross-referencing available data to verify accuracy. For example, if a client provides incomplete income details, the adviser should reach out for further clarification and explore any supplementary documents that could help fill the gaps.
• Reference: Corporations Act 2001 – Sect 961B(2)(c)
• Related Article: Nailed It!: Three paths to better advice

7. Adviser’s Expertise

• Question: Does the adviser have the required expertise to provide advice on the subject matter?
• Consideration: The adviser must be competent, authorised, and appropriately experienced. Advisers can demonstrate their competence through relevant qualifications, ongoing professional development, and practical experience in the financial services industry. Appropriate experience includes technical knowledge and experience in dealing with specific client needs, such as retirement planning, risk management, or complex investment strategies. For example, an adviser providing advice on self-managed super funds (SMSFs) should have a track record of managing similar cases and a deep understanding of the relevant regulatory environment.
• Reference: Corporations Act 2001 – Sect 961B(2)(d)
• Related Article: Smarter CPD: “Engaging, expert and flexible” – This article highlights the importance of continuous professional development to maintain and enhance adviser expertise.

8. Product Recommendations

• Question: Were appropriate investigations conducted before recommending a financial product?
• Consideration: The product should be in the client’s best interest, not simply suitable. To assess whether a product truly aligns with the client’s best interests, consider factors beyond its basic suitability, including its long-term impact on the client’s financial situation, risk tolerance, potential fees, and any specific needs or preferences the client has expressed. Additionally, advisers should thoroughly compare alternative products and document why the selected product better aligns with the client’s stated objectives and circumstances. Avoid defaulting to lower costs as the primary indicator; evaluate the product’s overall value in the context of the client’s goals.
• Reference: Corporations Act 2001 – Sect 961B(2)(e)
• Related Article: Documenting the Strategy & Selection Process – This article provides guidance on effectively documenting the strategy and product selection process to ensure compliance and client-centric advice.

9. Switching Products

• Question: Before recommending a switch, was there a reasonable assessment of current and alternative products?
• Consideration: Clients must be clearly informed of the costs and risks of switching. Advisers should use clear, simple language to explain direct and indirect costs, including fees, tax implications, and potential loss of benefits. Additionally, advisers should provide clients with practical examples and scenarios that illustrate potential outcomes, ensuring clients understand the impact on their financial situation. Visual aids, such as charts or comparison tables, can be helpful tools to enhance understanding and ensure that clients can make informed decisions.
• Reference: Corporations Act 2001 – Sect 961B(2)(e)
• Related Article: Adviser Q&A: Product Replacement – This article discusses the considerations and obligations advisers must address when recommending the replacement of financial products.

10. Judgement Based on Relevant Circumstances

• Question: Was all advice tailored to the client’s unique situation?
• Consideration: Generic advice should be avoided, ensuring all recommendations are context-specific. Context-specific advice should take into account the client’s unique financial situation, goals, and preferences. For example, suppose a client is focused on saving for their child’s education. In that case, the adviser should provide specific strategies, such as setting up a dedicated education savings plan, rather than generic advice. To avoid giving generic recommendations, advisers should thoroughly understand the client’s individual needs and tailor advice accordingly, ensuring each recommendation directly addresses the client’s circumstances.
• Reference:  Corporations Act 2001 – Sect 961B(2)(f)
• Related Article: Complexity, clarity and ‘Best Interests‘- This article explores the necessity of exercising judgment based on relevant client circumstances to fulfil the Best Interests Duty.

11. Additional Reasonable Steps

• Question: Did the adviser take any other steps that would reasonably be regarded as being in the client’s best interests?
• Consideration: Ensure the adviser has exceeded the minimum requirements, if necessary, to serve the client better. This could include conducting additional research to fully understand the client’s specific circumstances, consulting with specialists or other experts when needed, providing supplementary educational materials, or exploring a more comprehensive range of product options. The goal is to provide thorough, well-supported advice beyond merely meeting the essential regulatory obligations.
• Reference: Corporations Act 2001 – Sect 961B(2)(g) 
• Related Article: [Compliance 101: The Law] – This article provides a detailed overview of Australian law, offering specific examples of how common law and statutory law overlap and explaining how ASIC interprets and applies the law.

12. Providing Appropriate Personal Advice

• Question: Was the advice provided appropriate to the client’s circumstances?
• Consideration: Confirm that the client is likely to be in a better position if they follow the advice given. This assessment should consider quantitative factors, such as increased savings or reduced debt, and qualitative factors, like enhanced peace of mind, reduced financial stress, or improved understanding of their financial situation. Advisers should document how the advice aligns with the client’s personal goals, needs, and preferences and ensure that the advice addresses any concerns or objectives identified during the client meeting.
• Reference: Corporations Act 2001 – Sect 961G 
• Related Article:  Records of Advice in Practice—This article examines the appropriateness of advice over time and the need to reassess client circumstances to ensure ongoing suitability.

13. Warnings About Incomplete or Inaccurate Information

• Question: Was the client warned that the advice was based on incomplete or inaccurate information?
• Consideration:** Ensure all warnings are appropriately documented, making clients aware of the advice’s limitations. Effective documentation should include a clear, written record of all warnings detailing the specific limitations and potential impacts. Advisers should also communicate these warnings verbally in a straightforward manner, ensuring the client understands the implications. Consider using follow-up emails summarising the discussion to reinforce key points and encourage clients to ask questions to confirm their understanding.
• Reference: Corporations Act 2001 – Sect 961H 
• Related Article: Nailed It!: Three paths to better advice 

14. Prioritising Client Interests

• Question: Did the adviser prioritise the client’s interests where a conflict of interest existed?
• Consideration: The adviser must disclose conflicts and demonstrate that the client’s interests were placed first. Effective conflict disclosure should include a clear explanation of the nature of the conflict, how it could impact the advice, and what steps have been taken to mitigate it. Advisers should ensure clients fully understand the disclosure by inviting questions and providing written confirmation. To demonstrate prioritising client interests, advisers should document the steps taken to ensure unbiased recommendations, including comparing alternative strategies or products and detailing why the recommendation best serves the client’s needs despite the potential conflict.
• Reference: Corporations Act 2001 – Sect 961J 
• Related Article: —This article discusses the importance of managing and disclosing conflicts of interest to prioritise client interests effectively.

15. Comprehensive Documentation

• Question: Was all relevant client information, advice details, and correspondence adequately documented?
• Consideration: Ensure the documentation provides a clear and thorough audit trail supporting compliance. Key elements that should be documented include client objectives, the rationale for recommendations, discussions of risks and costs, client questions and responses, any disclosed conflicts of interest, and follow-up actions. This level of detail helps create a transparent and comprehensive record that can be easily reviewed for compliance verification.
• Reference: Corporations Act 2001 – Sect 912A and REG 7.7.09C 
• Related Article: Improving advice: Better file-notes. – This article emphasises the role of comprehensive file notes in maintaining positive client relationships and ensuring transparency.

Implementing High-Quality File Reviews

To facilitate effective file reviews, Licensees should:

• Establish a Consistent Process: Create a straightforward procedure for when and how reviews are conducted.
• Engage Third-Party Consultants: Periodically engage compliance consultants to ensure impartiality and expertise.
• Focus on Training: Regular training on the principles of acting in clients’ best interest and managing conflicts can help maintain compliance.

Leveraging Technology for Compliance

Leveraging technology, particularly Regulatory Technology solutions like [complye], can significantly enhance compliance efforts in financial advisory services. Structuring file reviews in a proactive and risk-based framework, these tools help identify patterns, deficiencies, and risks early, reducing the need for remedial intervention and improving the quality of advice. Advisers can also leverage compliance technology platforms to automate routine checks, ensuring all client information is accurately recorded and flagged for potential risks. This proactive approach reduces manual errors and supports real-time compliance monitoring. Technology can spare you later regulatory headaches by streamlining compliance processes and maintaining accurate, up-to-date records.

Final Thoughts

Regular and effective file reviews help advisers comply with their obligations, foster client trust, and ensure that the advice delivered genuinely improves the client’s financial well-being. Adopting a client-first approach, backed by systematic reviews, helps to create a culture of compliance and excellence in advice delivery.

I once worked under a Manager (ex-Banking) who was adamant that an effective review required no more than 10 questions. She was loopy (and didn’t survive), but her view highlights the range of opinions on reviews; although we’ve provided 15 areas a reviewer should consider, a truly effective review will often have a broader scope.

For further reading and resources, please consult ASIC’s Regulatory Guides, including RG 175: Licensing – Financial Product Advisers and RG 244: Giving Information, General Advice and Scaled Advice. 

For expert assistance in strengthening your compliance processes and conducting high-quality file reviews, contact Assured Support today. Our tailored solutions ensure that your advice meets regulatory standards while delivering exceptional value to your clients. Visit our website or reach out to our team for more information!

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