How advisers can shift from paperwork to proof in the COFI era

Cape Town - Take a recent client file and hand it to a colleague who was not in the room during the consultation. Would they be able to tell what the client needed, what informed the recommendation, why the advice was useful, and what happened next? 

These questions are becoming increasingly important as the financial services industry prepares for the enactment of the Conduct of Financial Institutions (COFI) Bill.  

Sanlam says advisers shouldn't disregard the practices they have built under the Financial Advisory and Intermediary Services (FAIS) Act, because many of the foundations are already in place. The task now is to make the judgement behind the paperwork easier to see.  

How you can make good advice provable 

According to Andrie Bester, compliance manager at Sanlam Life and Savings, many of the practices that will matter under COFI should already be familiar. "If you do what is in the best interests of your clients, document everything properly, keep sound records and follow up with clients, a lot of the noise should fall away. You need to be able to show the regulator how you applied your mind in your client engagements." 

Meera Naidoo, Head of Legal Support at SanlamConnect, adds that the record of advice will remain central, but the quality of that record will become crucial. "It's not just going to be, 'I filled in the right document', or 'I filled in the right disclosure'. Your record of advice is going to have to be incredibly sound." 

Advisers and FSPs can begin by testing seven parts of the client journey: 

1. Record the reasoning behind the advice. Capture the client's needs and circumstances, what informed the recommendation and why it was considered suitable at that point in the client's life. 
2. Keep meaningful complaint records. Record the nature of complaints, how they were categorised and how they were resolved. Recurring issues may reveal where communication, advice processes or client service need attention. 
3. Pay attention to lapses and early terminations. These figures form part of the conduct information financial institutions may need to understand and produce. Patterns in the data should prompt questions about what may be happening behind the numbers. 
4. Make supervision visible. Where representatives are supervised, maintain clear records of the supervision undertaken and how it was documented. A statement that supervision occurred is less useful than evidence of what was reviewed and addressed. 
5. Keep the relationship alive after the sale. Financial advice should not be a once-off interaction that ends once the paperwork is signed. Regular engagement helps advisers understand when changes in a client's family, income, affordability or goals may affect their financial needs. 
6. Communicate for understanding. Financial institutions must provide information that is relevant, accessible and capable of helping clients make informed decisions. The goal should be to give the client a fair opportunity to understand it. 
7. Bring your conduct data together. Advice records, complaints, lapses, early terminations and client communications collectively show how clients are being treated. Advisers and FSPs should know where this information sits and whether it tells a coherent story. 
   Build on what already works

The fair-treatment principles underpinning COFI are not new. Treating Customers Fairly (TCF) has already shaped expectations across the financial sector, from product design and communication to useful advice and post-sale service.

COFI aims to bring these expectations together under a more consistent legislative framework and carry them through the full client journey. Naidoo says, "This means TCF will become more deeply embedded in how institutions design products, identify target markets, supervise intermediaries and engage with clients." 
Keep the client evidence trail alive

As the COFI Bill and its supporting conduct standards move through the legislative and regulatory process, Bester says the best way to prepare for this shift is to strengthen the practices that already support good client outcomes. "The industry will need to focus more on including thoughtful recommendations, clear records, understandable communication, meaningful complaints management and consistent follow-through."

Records or evidence will remain crucial. But it will soon have to make the reasoning and follow-through behind good advice visible, even when the adviser is not in the room.

*Meera Naidoo, Head of Legal Support at SanlamConnect and Andrie Bester, Compliance Manager at Sanlam Life and Savings