Know the importance of suitable advice

Anton focuses on one of the six outcomes of Treating Customers Fairly – suitable advice – which is a key principle relating to COFI. One of the key factors within suitable advice is risk profiling, which many confuse with risk tolerance. Anton explains that advisers need to understand risk profiling very well and that it consists of three parts:

1. Risk tolerance
2. Risk capacity
3. Required risk

Each part plays a very important role in truly knowing the needs of your client, in your role as an adviser and in designing a financial and investment plan that serves them completely. These are established concepts and likely already incorporated in advisers’ practices, but with a slight tilt to focus explicitly on these concepts might be required.

Adopting COFI may require some tweaks

Adopting COFI in your practice may require some tweaks in your practice, but probably not a complete overhaul. Here are six of Anton’s tips:

1. Focus away from legislation and towards best practice principles. Don’t be legislation-driven; continue to be business-driven. Rather than focusing on legislation and paperwork, redefine your game, like tightening your value proposition.
2. Go back to the fundamentals. The fundamentals of practice management have not changed in many decades, and if you’re running a good practice, then you probably already have them in place. COFI will not change this. Review the fundamentals; sharpen your processes.
3. Limit paperwork. Under COFI, there is room to reduce paperwork, which brings you a step closer to ensuring a more pleasant experience for your client. Digitisation can help your practice, but the quality of your administration and record-keeping is sacrosanct.
4. Don’t use outdated risk profilers. Risk profiling is critical, as is its link to record-keeping. So, know the relationship between the risk profiler you’re using and the consequent conversations that you have with your clients.
5. Check yourself. How you lead in your practice and your attitude to legislation will determine how others around you adopt the changes, especially legislative and compliance-related ones.
6. Review your culture, values and governance principles. Your vision is to build a practice that is sustainable and serves the interests of your clients. Determine what culture, values and governance principles will get you there. If your culture is to build trust with your clients, then you’ll automatically be dealing with them with honesty, competency, respect and skill, and aligning to COFI.