Annual Review

Annual Review

As financial advisors that provide advice to our clients, we have a responsibility to always offer them the best products and service for their needs. As their circumstances and financial capacity changes from year to year, the products and offering in their current portfolio may need to change as well.
This should not only be something we do from an ethical standpoint and our duty to our clients, wanting only the best for them, but is it in fact dictated by Section 7(4) in the General code of conduct.

Section 7(4) of the General Code of Conduct states as follows:
A provider who has provided advice to a client or is rendering ongoing financial services to the client in respect of one or more financial products, must on a regular basis (but not less frequently than annually) provide the client with a written statement identifying such products where they are still in existence, and providing brief current details (where applicable), of –
(a) any ongoing monetary obligations of the client in respect of such products;
(b) the main benefits provided by the products;
(c) where any product was marketed or positioned as an investment or as having an investment component, the value of the investment and the amount of such value which is accessible to the client; and
(d) any ongoing incentives, consideration, commission, fee or brokerage payable to the provider in respect of such products.

Breaking down what an annual review should entail?
This review should be conducted annually and in writing. In terms of the General Code of Conduct below is the only information you need to provide to a client in terms of their annual review – a little more than a basic policy schedule.

1. Advise the client of the premium on the policy or investment for the next year.
2. The main benefits of the policy – if it is a risk policy, advise the client on the type of cover and the amount of cover that they have.
3. If the client has an investment, you need to advise them of the current value of the investment and how much of that investment amount is accessible immediately.
If the client has a living annuity, you will need to advise them of the percentage that they have elected and what that amounts to in rand value.
4. You need to advise the client in the annual review, what the policy is costing them in terms of:
– ongoing incentives
– commissions
– fees

Taking it a little more in depth:
If you cover the points mentioned above, you will be complaint in terms of the code of conduct. However if you are merely sending your clients a policy schedule with a printout attached, are you really carrying out an annual review or just ticking a box for compliance – a box that really does not treat your customers fairly?
We suggest that as a representative earning fees or ongoing commissions from a client, you need to consider the following types of questions:
1 Does the client have sufficient cover?
2 Does the client have the most appropriate cover for their needs?
3 Have any of their needs or circumstances changed in the past year?
4 Is the client in the correct portfolio based on their risk profile?
5 When last did you complete a risk profile?
6 Could a client’s appetite for risk have changed?

We encourage you not just to tick the boxes of the code of conduct, but to take the time to go in depth and offer your clients what we promise in our vision statement for Hampshire – functional, professional and efficient distributor of financial products.

Louise Pardy

Louise Pardy

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