Winthrop Mason | Financial Services
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Financial Services

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Financial planning

 

Financial planning is the process of determining the most appropriate strategies necessary to achieve a particular individual’s financial and lifestyle objectives. 

 

The range of strategies considered may include retirement planning, budgeting, asset protection, asset allocation, portfolio construction, gearing, personal risk insurance, tax minimisation, business succession planning and estate planning.

 

Legislative and regulatory context

In Australia, the financial planning industry is a heavily regulated industry.  There are specific licensing, financial, operational, training, due diligence and disclosure requirements imposed on any business wishing to provide financial advice.

 

The relevant legislative, regulatory and industry mandates are primarily to be found in:

 

  • Corporations Act 2001 (Cth) (especially Chapter 7);
  • Corporations Regulations 2001 (Cth);
  • Australian Securities and Investments Commission Act 2001 (Cth);
  • ASIC Regulatory Guides;
  • FPA Code of Professional Practice, Code of Ethics and Practice Standards;
  • Common law (case law determined by judges)
  • Contract law

 

Essentially, a financial planning business can only operate if it has an appropriate license issued by ASIC, known as an Australian Financial Services Licence (“AFSL”).  A financial planner must either have an AFSL, or be an Authorised Representative of an AFSL holder, in order to provide financial advice.

 

Financial planning process

The financial planning process typically involves the following steps:

 

1.    Ascertain the client’s personal needs, objectives and situation
2.    Determine the client’s short, medium and long term financial and lifestyle goals;
3.    Consider appropriate strategies to meet the client’s financial and lifestyle goals;
4.    Consider appropriate asset allocation and portfolio construction for the client;;
5.    Undertake financial modelling to consider impact of recommended strategies;
6.    Consider the specific investment products;
7.    Prepare a Statement of Advice (“SOA”) for the client outlining the strategies;
8.    Discuss and implement the agreed strategies and recommendations for the client;
9.    Provide a status report on the client’s investments and other strategies;
10.  Review the strategies on a regular (eg. annual) basis and modify as appropriate.

 

What are the main obligations imposed on financial planners?

Financial planners have a duty to act in their client’s best interests.  In discharging this duty, he or she must:

 

  • Investigate the client’s needs, objectives and financial situation adequately;
  • Provide advice only if it is reasonable to conclude that the advice is appropriate;
  • Conduct reasonable investigations into the financial products to be recommended;
  • Place the interests of the client ahead of any interests they have;
  • Warn the client if advice is based on incomplete or inaccurate information;
  • Make clear, concise and effective disclosure of any material information.

 

Note that this is not intended to be an exhaustive list.  It is, however, indicative of the heavy obligations imposed on financial planners in Australia.

 

Common issues experienced with financial planners

The following is a list of some of the most common issues found with financial planners:

 

  • Failing to ask enough questions to ascertain the client’s situation, needs and objectives;
  • Failing to act in accordance with the client’s instructions;
  • Failing to provide the client with an SOA if they give the client personal advice;
  • Failing to give the client an SOA in a timely manner;
  • Failing to ensure that the recommendations they make meet the client’s situation, needs and objectives (or if they don’t, then explain why not);
  • Failing to ensure that their recommendations include advantages and disadvantages:
  • Failing to conduct a risk profile of the client, or otherwise to conduct it properly;
  • Failing to ensure that asset allocations are consistent with the client’s risk profile;
  • Failing to ensure that the products they recommend have been properly researched;
  • Failing to keep full records of all communications and research conducted;
  • Failing to fully and clearly disclose any conflicts of interest;
  • Failing to fully and clearly disclose any fees and commissions received;
  • Failing to ensure that costs and fees are disclosed in dollars ($).

 

Complaints and dispute resolution

If a client is dissatisfied with their financial planner, there are a number of avenues:

 

  • Lodge a complaint/claim with the financial planner directly;
  • Lodge a complaint/claim with the financial planner’s AFSL holder;
  • Lodge a complaint through the relevant industry body (eg. FPA);
  • Lodge a complaint through ASIC;
  • Lodge a claim through the Financial Ombudsman Service (“FOS”);
  • File a claim in court (such as Magistrates, District or Supreme Court).

 

For AFSL holders and financial planners, Winthrop Mason Lawyers can assist by:

 

  • Applying for, or varying the terms of, your Australian Financial Services License;
  • Drafting, updating  or reviewing disclosure documents, such as Financial Services Guides, Statements of Advice, Records of Advice and Product Disclosure Statements;
  • Drafting, updating or reviewing internal policies and procedures (such as Investment Research Policy, Gearing Policy, Soft Dollar Policy and Training Policy);
  • Advising on a financial planner’s rights and obligations regarding their clients;
  • Investigating, managing and negotiating the resolution of complaints and claims;
  • Developing an enterprise-level risk management program and compliance program;
  • Conducting compliance audits of financial planners’ client files;
  • Preparing formal breach notifications for ASIC;
  • Negotiating the terms of any proposed Enforceable Undertakings with ASIC;
  • Liaising with ASIC and other regulators in relation to any potential compliance issues.

 

For financial planning clients, Winthrop Mason Lawyers can assist by:

 

  • Reviewing the financial advice provided to you to ensure that it is fully compliant;
  • Advising on your legal rights as against your financial planners or AFSL holder;
  • Considering strategies and options available in the event of a compensation claim ;
  • Calculating the monetary value of your potential compensation claim;
  • Investigating, managing and negotiating the resolution of client complaints;
  • Negotiating compensation claims with your financial planner and/or their AFSL holder;
  • Preparing submissions on your behalf before the Financial Ombudsman Service;
  • Commencing legal proceedings against the financial planner and/or AFSL holder.

 

For a no-obligation initial consultation, go ahead and give us a call.

Superannuation

 

Superannuation is compulsory long-term savings, governed by a highly complex and ever-changing set of legal and regulatory rules. 

 

Types of superannuation funds

 

There are a number of types of superannuation funds in Australia:

  • Self-managed superannuation funds
  • Small APRA funds
  • Retail superannuation funds
  • Corporate superannuation funds
  • Industry superannuation funds

 

(NOTE: The contents of this page are currently being updated.  If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)

 

Self-managed superannuation funds (SMSFs)

 

Self-managed superannuation funds (“SMSFs” or “DIY funds”) are a special type of superannuation funds.  The key point of difference with other types of super funds is that it is the investor themselves who control and manage the money in their capacity as trustees.

 

There are very strict rules imposed around the establishment and maintenance of SMSFs, and hefty penalties for trustees who fail to properly discharge their trustee obligations.

 

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(NOTE: The contents of this page are currently being updated.  If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)

 

Managed investments

 

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(NOTE: The contents of this page are currently being updated.  If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)

General insurance

 

General insurers are required to comply with the Australian Prudential Regulation Authority (APRA)’s Prudential & Reporting Standards, as well as substantially comply with its Prudential Practice Guides. 

 

The areas covered by the Standards comprise the following:

 

  • Capital adequacy requirements
  • Assets in Australia
  • Risk management
  • Credit risk
  • Operational risk
  • Insurance risk
  • Reinsurance management
  • Audit and related matters
  • Transfer and amalgamation of insurance business
  • Outsourcing
  • Business continuity management
  • Pandemic planning and risk management
  • Management of security risk in information and IT
  • Custody arrangements
  • Balance sheet and market risk
  • Governance
  • Fit and proper
  • Remuneration

 

In addition, the General Insurance Code of Practice developed by the Insurance Council of Australia (ICA) requires general insurers who are ICA members to comply with the requirements under the Code.  The Code sets out the way in which consumers can expect their insurer to behave, and the recourse that policyholders have in disputes.

 

Winthrop Mason Lawyers can assist you by:

 

  • Advising on the legal or interpretation of the requirements of certain Standards;
  • Reviewing business operations to assess compliance with APRA Prudential Standards
  • Reviewing reporting procedures for compliance with APRA Reporting Standards;
  • Preparing a formal breach reporting submission to APRA in the event of a breach;
  • Liaising with APRA on your behalf in relation to specific issues.

 

For a no-obligation initial consultation, go ahead and give us a call.

Valuers

 

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(NOTE: The contents of this page are currently being updated.  If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)

 

Life insurance

 

Life insurers are required to comply with the Australian Prudential Regulation Authority (APRA)’s Prudential & Reporting Standards, as well as substantially comply with its Prudential Practice Guides. 

 

The areas covered by the Standards comprise the following:

 

  • Capital adequacy requirements
  • Assets in Australia
  • Risk management
  • Credit risk
  • Operational risk
  • Insurance risk
  • Reinsurance management
  • Audit and related matters
  • Transfer and amalgamation of insurance business
  • Outsourcing
  • Business continuity management
  • Pandemic planning and risk management
  • Management of security risk in information and IT
  • Custody arrangements
  • Balance sheet and market risk
  • Governance
  • Fit and proper
  • Remuneration

 

Winthrop Mason Lawyers can assist you by:

 

  • Advising on the legal or interpretation of the requirements of certain Standards;
  • Reviewing business operations to assess compliance with APRA Prudential Standards
  • Reviewing reporting procedures for compliance with APRA Reporting Standards;
  • Preparing a formal breach reporting submission to APRA in the event of a breach;
  • Liaising with APRA on your behalf in relation to specific issues.

 

For a no-obligation initial consultation, go ahead and give us a call.

Private health insurance

 

Private health insurers are required to comply with the Private Health Insurance Administration Council’s (“PHIAC”) Prudential & Reporting Standards. 

 

The areas covered by the Standards comprise the following:

 

  • Solvency Standard
  • Capital Adequacy Standard
  • Governance Standard
  • Appointed Actuary Standard
  • Disclosure Standard
  • Outsourcing Standard
  • Risk Management Standard (currently under discussion)

 

In addition, most private health insurers are required to comply with the Private Health Insurance Code of Conduct (“Code of Conduct”), which is a self-regulatory code to promote informed relationships between private health insurers, consumers, agents and brokers.  Its key objective is to maintain and enhance regulatory compliance and service standards.

 

The Code of Conduct is a voluntary industry code in which signatories agree to:

 

  • work towards improving the standards of practice and service in the private health insurance industry;
  • provide information to consumers in plain language;
  • promote better informed decisions about their private health insurance products and services by:

–  ensuring that policy documentation is full and complete;

–  providing clear explanations of the contents of their policies when asked by a consumer; and

–  ensuring that persons providing information on health insurance are appropriately trained

  • ensure information between consumers and the fund is protected in accordance with privacy principles
  • provide information to consumers on their rights and obligations under their relationship with the consumer, including information on this Code of Conduct; and
  • provide consumers with easy access to the fund’s internal dispute resolution procedures, which will be undertaken in a fair and reasonable manner and to advise them of their rights to take an issue to an external body such as the Private Health Insurance Ombudsman (“PHIO”)

 

Winthrop Mason Lawyers can assist you by:

 

  • Advising on the legal or interpretation of the requirements of certain Standards;
  • Reviewing business operations to assess compliance with PHIAC Prudential Standards;
  • Reviewing business operations to assess compliance with the Code of Conduct;
  • Reviewing reporting procedures for compliance with PHIAC Reporting Standards;
  • Preparing a formal breach reporting submission to PHIAC in the event of a breach;
  • Liaising with PHIAC and/or PHIO on your behalf in relation to specific issues.

 

For a no-obligation initial consultation, go ahead and give us a call.

Accounting

 

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(NOTE: The contents of this page are currently being updated.  If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)

Tax agency

 

Tax agents are professional advisers who prepare and lodge income tax returns on behalf of taxpayer clients.  They are the only ones authorised to do so, and must be registered with the Tax Practitioners Board.

 

(NOTE: The contents of this page are currently being updated. If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)

Stockbroking

 

Stockbrokers are financial services professionals who act as agents for buyers and sellers of shares (or stocks) and other securities.  They are generally paid a commission based on a percentage of the value of the shares being bought or sold.

 

(NOTE: The contents of this page are currently being updated.  If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)

Mortgage broking

 

Mortgage brokers act as intermediaries between borrowers and lenders, in return for
being paid a commission, which is typically calculated based on the total value
of the money to be borrowed.  They are usually appointed by the borrowers, although they can sometimes act for lenders.

 

(NOTE: The contents of this page are currently being updated.  If you would like to know more about this subject matter, please feel free to email us at info@winthropmason.com.au. We would love to hear from you and will endeavour to respond within the next 24 hours.)