Not saying what you don’t know

Very occasionally, a client will choose not to give their financial adviser one or more salient pieces of information. This is a very strange thing for a client to do, as it will obviously limit the quality and comprehensiveness of the advice that the client will then receive.

But, sometimes, strange people request our help as well.

When they do, the adviser needs to decide on a few matters. Firstly, the adviser must decide whether they can in fact provide advice, given the limited nature of the information that has been provided. Sometimes, advice will not be possible. A client who refuses to discuss their health history, for example, cannot obtain life insurance and the adviser will simply be wasting their time even thinking about insurances.

In other cases, some limited advice will be possible. For example, the client refusing to discuss their health history can still be advised about how best to invest their super benefits. In those cases, it is very important that the SOA state very prominently and clearly that the advice is limited by the information that has not been provided.

The basic idea is that the risk that is created by the client’s non-disclosure be passed back to them via clear statements in the SOA. This is only fair: if the client cannot provide all of the information that the adviser needs, then it is unreasonable to expect that the adviser will accept the professional risk that the resulting advice has been compromised by one or more undeclared pieces of information.

Accordingly, in the infrequent cases where advice is provided in the absence of comprehensive information, that advice needs to contain a clear statement that the advice is limited by the absence of that information. For example:

We need to state that you have not given us all of the information that we require in order to provide comprehensive advice to you. This places a limit on our advice: it is not as comprehensive and well-informed as we would normally like it to be.

We have discussed this with you and you understand that the absence of this information may have a material impact on the advice that we have provided.

The Dover Group