Basic Deposit and Simple Savings Products. An investment research policy for dealing with basic deposit and simple savings products

Transcription

1 Basic Deposit and Simple Savings Products An investment research policy for dealing with basic deposit and simple savings products

2 Table of contents Table of contents... 2 At a glance... 3 Basic deposit and simple savings products... 4 What is a basic deposit product?... 4 What are simple savings products?... 4 Disclosure and documentation requirements... 4 Advice process... 6 Non-approved basic deposit and simple savings products... 6 Standing instructions authority... 7 Training and accreditation... 7 What is a standing instructions authority?... 7 Approved standing instructions... 8 Key requirements... 8 Client suitability... 8 Documentation requirements... 8 Ongoing reviews... 9 Additional information Adviser Support Penalties and remedies, internal and external Policy Review Tools and Resources Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 2

3 At a glance This guideline outlines your obligations when advising on and/or dealing with basic deposit and simple savings products only. In situations where basic deposit or simple savings products are the only products being addressed, concessional disclosure treatment is available. In the event advice on basic deposit or simple savings products forms part of broader, strategic advice to your client, you are required to document your advice in a SoA. This policy also provides you with an option to assist your clients manage their budgeting and cash flow goals by using a Standing Instruction Authority to perform particular transactions expressly agreed to between you and your client within your clients bank/savings account. You can apply parts of this policy individually, or package them together and expand your advice offer and value proposition. Basic deposit and simple savings products This part applies when you are providing advice or dealing services about basic deposit and simple savings products only. It may also be applied to no advice/client directed transactions. In this guideline, CMTs, funeral bonds* and some other deposit products, are referred to as simple savings products. *A reference to a funeral bond in this policy is a reference to only those products that are specifically designated as funeral bonds on the approved product list and no other funeral-related products. Standing instructions authority A Standing Instructions Authority may benefit clients seeking assistance with their cash flow management and savings plans. This authority authorises you to transact (according to a strict set of terms and conditions) on your client s bank/savings account using the Standing Instructions Authority terms and conditions document. Basic deposit and simple savings products advice forms part of the Client Engagement and Advice Formulation stage of the advice process. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 3

4 Basic deposit and simple savings products What is a basic deposit product? Basic deposit products are a type of financial product that has all of the following characteristics: No minimum deposit period or alternatively, there may be a period of 5 years or less. If there is no minimum deposit period, or if there is a minimum deposit period and it is more than 2 years and up to 5 years, then the product must allow for the withdrawal of funds without prior notice or, in some cases, a relatively short period of notice, regardless of whether or not the withdrawal attracts a reduction in the return generated. No entry fees, exit fees or management fees, but account maintenance fees are permitted. A specified return or interest rate (which can be a reference rate). Examples of basic deposit products can include: Term deposits with a term of 2 years or less. Term deposits of more than 2 years and up to 5 years provided the product allows for the withdrawal of funds without prior notice (in certain circumstances a relatively short notice period may apply). Standard cheque/savings accounts. Online savings accounts. Interest-bearing accounts Mortgage offset accounts. (Note: advice in relation to your client s mortgage offset account could stray into debt advice (eg. Recommending changes to an existing home loan). Please refer to Futuro s Website for further details of your obligations regarding credit/debt advice. What are simple savings products? Cash management trusts (CMTs), funeral bonds, and some other deposit products, are NOT basic deposit products. However, as they are relatively simple to understand and can benefit from some concessions regarding disclosures, we refer to them as simple savings products. A CMT is a financial product and classed as a unit trust, which allows investors to pool their money for investment in the short-term money market. A funeral bond is a capital guaranteed tax paid investment, designed to help investors meet their funeral expenses. Disclosure and documentation requirements When you provide advice about basic deposit and/or simple savings products together with other financial product advice, the usual financial planning advice process and disclosure requirements apply. This includes providing your Financial Services and/or Credit Guide (FSG/CG), an advice document and the Product Disclosure Statement (PDS) for each product recommended. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 4

5 Less onerous disclosure requirements apply when your advice is only about basic deposit and/or simple savings products. Basic deposit product advice (only) Simple savings product advice (only) FSG/CG Yes Yes Advice document Choose from the following options: 1. Disclose verbally and complete the Basic deposit and simple savings products file note (to be retained on file). 2. Complete the Advice letter (available in DRAFT and provide this to your client. PDS or other disclosure documents Yes** Yes **A PDS may not be available for basic deposit products. As such, you should contact the product issuer to determine what disclosure documents need to be provided to your client instead of a PDS. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 5

6 Advice process Provide your FSG/CG You are required to provide your FSG/CG to your client in all instances. Meet the bests interests duty obligations You must comply with the Best Interests Duty so you must be able to demonstrate that your advice is in your client's best interests. A key component in showing you have satisfied the Best Interests Duty is demonstrating you have complied with the steps of the Safe Harbour obligations. You can use your licensee approved Fact Find to capture the information required when fulfilling your Best Interests Duty obligations. For more information on the Best Interest Duty obligations, refer to the Licensee Policy - Best Interests Duty on the Futuro website. You are not required to provide a Statement of Advice (SOA), however, you must provide the client with the following information at the time of providing your advice (or as soon as practicable after the advice is provided) and before you implement the product transaction: 1. Fees, charges, remuneration and other benefits that might reasonably be expected to or capable of influencing your advice (as would normally be required in an SOA); and Document your advice 2. Information about any other interests, associations and relationships that might reasonably be expected to or capable of influencing your advice (as would normally be required in an SOA); 3. Appropriate warnings (eg, a warning in relation to incomplete information, insolvency risk, etc.); 4. Your recommendation and the basis of your advice; 5. Confirm the specific product information with the client (e.g., amount invested, relevant interest rate, time horizon etc.). You can provide this information in one of two ways as set out below: Complete the Advice letter (available from DRAFT) and provide this to your client. Basic deposit accounts and all simple savings products Provide a PDS if one is available. Provide the appropriate product disclosure information to your client Where no PDS is available (eg, if the product is a basic deposit product), please contact the product issuer to determine the documents that need to be provided to your client to ensure the necessary product disclosures are made. These documents must be provided to your client when providing advice and/or arranging the product. NB: Funeral bonds are not financial products and do not have a PDS. Therefore you should provide the alternative disclosure document that the product issuer has prepared for that product. Non-approved basic deposit and simple savings products A one-off approval for a non-afsl bank basic deposit product, bank term deposit or bank Retirement Savings Account, is not required when providing a basic deposit solution for the client, as a general approval applies, provided; The product is issued by an Australian licensed bank, and Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 6

7 You have confirmed with the product issuer which documents need to be given to the client to satisfy the PDS disclosure requirements. For CMTs and non-bank accounts (such as accounts offered by building societies and credit unions) not on your Licensee approved list, the normal approval requirements apply. For simple savings products (eg. CMTs) the normal approval requirements apply. Please refer to the Investment Research Policy - Non APL Platforms and Products for further information. Standing instructions authority You can offer a service by which your client/s gives you authority to transact on their bank/savings account through a Standing Instructions Authority. Training and accreditation Advice scenario Accreditation name Location Standing instructions authority recommendations Standing instructions authority Jigsaw Learning System What is a standing instructions authority? A standing instructions authority allows you to transact on your client's bank/savings account on their behalf in accordance with a set of predefined instructions. These instructions are outlined in the Standing Instructions Authority Terms and Conditions. The authority is designed to allow advisers to transfer funds between the client s nominated accounts and to nominated third parties in accordance with the client s specific instructions. The standing instructions authority documents the terms and conditions relating to the operation of the authority and also details the specific transactions that the client has authorised you to undertake. Advice to transfer funds that results in the acquisition (or disposal) of financial products is only able to be done pursuant to the provision of the relevant advice document. For example, advice that recommends contributions to, or withdrawals from, a financial product (regardless of whether or not the client already holds the product) is required to be provided in the relevant advice document. Important: The standing instructions authority does not constitute an MDA service or Power of Attorney. It does not provide you with discretion or judgment in respect of the transactions conducted on the client's account. Each transaction you complete must be in accordance with the terms and conditions agreed with your client. Clients must be located within Australia at the time of the transactions. The standing instructions authority cannot be used to establish or vary service fee arrangements between you or an associated entity and your client. You need to obtain separate written authorisation from your client for your service fee arrangements. The service must not include the redirection of client correspondence to your business (acting as a mail house) for example, receiving invoices or distribution statements. It is recommended that your client activate their bank s 2 step verification system for transfers out of their bank/savings account (that you are authorised to transact on) for transfers to any transferees other than those specifically authorised by the client. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 7

8 Approved standing instructions The following standing instruction authority scenarios are examples of the types of transactions considered appropriate under the standing instructions authority: When an account reaches a particular balance, transfer the excess to a nominated account or transferee When an account balance falls below a particular balance, restore the account balance by drawing from a nominated account Arrange for the interest payments or distributions from funds credited to a nominated account to be credited to an alternate account at agreed intervals. Key requirements 1. Client suitability: Assess whether the standing instructions authority is appropriate to meet your clients needs. 2. Documentation: Ensure you can fulfill any ongoing obligations to your client. Document and agree on clear instructions with your client as to the frequency for transacting on their account, which accounts you are permitted to transact on, and the transactions you are expected to perform. 3. Administration: You must have adequate procedures and administrative support to carry out the clients standing instructions. You are required to maintain a register of all clients you have this authority in place for. This register is to be made available to the Licensee upon request. 4. Reporting: You are required to provide regular reporting in line with the frequency of transactions on your client s account. For example, if you are transacting on a quarterly basis on your client s bank/savings account, you should be providing statements at the same frequency. You may rely on statements issued by the client s bank only if these statements are issued at the same frequency as the transactions you are conducting. Futuro reserves the right to revoke this authority at any time if it is found to be used for any purpose other than what is intended from this guideline, or for which you have gained approval. Client suitability Suitable Not suitable The service is seen as an integral part of a comprehensive wealth management offering. The client wants you to act quickly on their behalf, to execute transactions (in accordance with the standing instructions authority terms and conditions) without hassle or extra paperwork. Your client is too busy and wants you to help them manage their day-to-day financial affairs. Your client requires more help than usual to reach their savings goals. They need someone to manage their cash flow to ensure they remain on track with their financial goals. Clients that do not have internet access. Online access to accounts and transaction is not an important feature. Clients that wish to retain control over their accounts. The client does not want to grant authority for someone else to transact on their account. The service does not assist the client to achieve their goals. The standing instructions authority must not be recommended if your client has any of the above features and characteristics. Documentation requirements You need to obtain the client s written consent to the Standing Instructions Authority terms and conditions before you execute any transactions. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 8

9 The documentation requirements depend on the scope of your advice and services as shown below: Scenario No product advice. Advice is limited to commencing a cash management strategy with no advice on the particular transactions being the subject of that authority. You recommend a cash management service. The client already has a cash management account or other cash product. The client knows what transactions they would like you to perform. Basic deposit or simple savings product advice (only)* You recommend a basic deposit or simple savings product to implement the standing instructions authority and/or You recommend a cash management service that involves regular contributions to or withdrawals from existing basic deposit or simple savings products (only) Basic deposit and/or simple savings product advice with other financial product advice* Document name and location Standing instructions authority cover letter (inclusive of terms and conditions) DRAFT Advice letter basic deposit and simple savings products (inclusive of Standing Instructions Authority terms and conditions) DRAFT Standing instructions authority terms and conditions attached to your advice document You recommend other financial products in addition to a basic deposit and/or simple savings product to implement the standing instructions authority DRAFT and/or You recommend a cash management service that involves regular contributions to or withdrawals from other existing financial products Ongoing reviews You must review the ongoing suitability of the standing instructions authority on an annual basis to ensure this remains appropriate for your client, and to obtain their agreement to continue with the arrangement. If your client cannot be contacted at the time their annual review is due, the standing instructions authority arrangement must be suspended. File note any attempts to contact your client in this instance. Confirm in writing to your client that the service will suspend if you cannot conduct their review. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 9

10 Additional information Adviser Support Query type Website Location Person Responsible Contact details Advice practice policy and advice standards Compliance Standards Compliance Manager Investment research policy and advice standards Compliance Standards Investment Committee Chairman Compliance queries Compliance Manager Investment queries Investment Committee Chairman Technology queries Jigsaw Advice Technology , option 1 Non-Approved Product Request form Products and Research Investment Committee Chairman Checklists and forms Advice Practice Support Tools Compliance Manager Penalties and remedies, internal and external Licensee remedies and penalties As with all financial services advice requirements, penalties and remedies exist both externally through the regulator, and internally at a Licensee level. You should always contact your Licensee support team if you have any questions in relation to complying with your Licensee requirements and follow the self-reporting process if you think that you have breached the requirements. Early detection of a breach or issue can avert a more systemic or far reaching problem and is conducive to a simpler remedy than a more serious implication. Policy Review This policy will be reviewed by the Futuro Audit and Compliance Committee at least annually or as changing circumstances warrant. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 10

11 Tools and Resources Tool name What it does Where to find it File note template - Basic deposit and simple savings products Use this file note template to document your advice where the advice is scoped to basic deposit or simple savings products such as CMTs only. Advice letter - basic deposit and simple savings products Where advice is scoped to basic deposit and simple savings products, CMTs or funeral bonds only, a SoA is not required. This letter can be used instead. The Standing Instructions terms and conditions form is required to be attached to your advice letter when recommending a standing instructions authority. DRAFT Cover letter - Standing Instructions Authority This letter template sets out what you need to disclose when recommending a standing instructions authority only (no basic deposit product advice is being given). Terms and conditions - Standing Instructions Authority This form sets out the terms and conditions for transacting when you are recommending the use of the standing instructions authority with your client. Version 2.0 May 2015 Investment Research Policy Basic Deposit and Simple Savings Products Page 11