Chapter 02 – The Statement of Advice preparation process – Risk Insurances

Step 1. Get to know your client

This step involves the provision of a Financial Services Guide, the client’s completion of a fact finder (note it is the client who is supposed to complete the fact finder), gathering the supporting documents for any existing superannuation funds (member statements, PDSs, etc) and a meeting with the client to discuss their needs. The result of this meeting should be to have determined the amount and type of the risk insurance required.

At the end of step 1, the adviser should have the following documents on file:

  1. Signed acknowledgment that a FSG was provided;
  2. Signed fact finder in the client’s handwriting;
  3. Member statements setting out the details of any and all existing risk insurance policies;
  4. PDSs setting out the details of all existing insurance policies;
  5. File notes detailing the agreed amount and type of insurance that will be researched. The best kind of file note is one that is sent to the client as an email. That is contemporaneous and establishes the client’s acceptance of the contents of the note.

Step 2. Do your research

This involves gathering quotes for the types and amounts of insurance that have been identified in step one.

This step is often done online using a quoting software such as Omnium or LifeRisk.

If the needs analysis is relatively easy, and the client has provided all the documents listed above, this step can be conducted with the client present.

Step 3. Select the preferred insurance/s

This step involves choosing the preferred insurance policy or policies, and the amount to be insured, based on the results of steps one and two.

This step will typically involve a meeting with a client. This meeting can be a separate meeting to the first meeting, or it can occur within a longer first meeting.

In the case of a longer first meeting, the adviser needs to ensure that all of the elements of steps one and two have been completed. If they have not, the adviser will not be able to show that any resulting advice is in the client’s best interests.  (Note: the advice may be in the client’s best interests – but the adviser will not be able to show this).

Once the preferred insurance has been identified, the adviser can start to organise – but not complete and not submit – the client’s application. This might include completing part of a written application form or an online application process. However, the application cannot be completed and submitted because the client cannot sign or otherwise approve the application being lodged prior to the adviser providing them with a written statement of advice.

Step 4. Prepare a Statement of Advice

The statement of advice needs to be prepared showing the recommended amount and type of insurance. The SOA then needs to be lodged with Dover Compliance for review before being made available to the client.

Once approved by compliance, the SOA can be sent or given to the client. Only then can the client sign an authority to proceed as discussed in the next step.

Step 5. Gain the client’s authority to proceed and commence implementation.

The approved SOA can then be presented to the client and their authority to proceed gained. The application for the risk policy can now be signed and submitted and the adviser can do everything else required to implement the advice.

Note: the adviser must ensure that the application form is submitted after the SOA has been accepted. The adviser must also ensure that the details in the application are current as at the date of submission. This can be an issue if the application form is filled out over more than one day.

The client must not sign the application prior to the acceptance of the SOA.

Step 6. Respond to any issues that arise during implementation.

These might be things like issues with underwriting. For example, an insurer may decide to impose an exclusion or a loading on a policy. A client can respond to this in a number of ways. They might simply accept the exclusion or loading. Or they might decide that they would like to pursue another insurer’s policy.

Issues such as these will require a Record of Advice to be completed. The ROA needs to refer to the original SOA and it needs to set out all material changes to the original SOA. An exclusion is a material change. So is a loading, as it changes the premium payable. Obviously, a change of insurer is also a material change.

In the event of such a change, the ROA needs to be prepared, reviewed by Dover Compliance and agreed to by the client before the implementation is re-commenced.

The Dover Group