Record of Advice for financial planning

The same section 9, different material

Section 9(1) of the General Code requires a record of the advice that reflects the basis on which it was given. In a planning context that comes down to four things, and they are the four an adjudicator reads in order:

1. 01A summary of the information and material the advice was based on — the client’s circumstances, objectives, time horizon, existing products and capacity for loss.
2. 02The financial products that were considered.
3. 03The product or products recommended, with an explanation of why the recommendation is likely to satisfy the client’s identified needs and objectives.
4. 04Where the recommendation replaces an existing product, the comparison and the reasons the replacement is to the client’s benefit.

The objective has to be a number and a date

Short-term advice is anchored by a sum insured someone can look up. Planning advice is anchored by an objective the client described in words, and a record that carries the words but not the arithmetic cannot be defended. "Retire comfortably at 60" is not an objective; "an income of R 45,000 a month in today’s money from age 60, for a 30-year horizon, of which the existing RA funds roughly a third" is. Write the target, the assumptions behind it — inflation, growth, contribution escalation, drawdown — and the shortfall the recommendation exists to close. The assumptions are what make the number checkable later, and they are what a reviewer will ask for first.

Risk profile is three questions, not a score

A single risk score is the most common weakness in a planning file, because it hides the disagreement that actually matters. Tolerance is what the client says they can stomach; capacity is what their finances can absorb without derailing the goal; required risk is what the objective demands. When they conflict — a cautious client with an ambitious target is the ordinary case — the Code does not say which wins, but it does require the recommendation to be appropriate and explained. So record the conflict and the resolution: the objective moved, the tolerance moved, or the shortfall was accepted knowingly.

Costs are part of the advice, not a disclosure afterthought

Over a thirty-year horizon the fee stack is one of the largest determinants of the outcome, which makes it part of the recommendation rather than a footnote to it. The record should carry the advice fee, the platform or administration fee, the fund charges, and any initial or ongoing charge you are paid — as figures, and as their effect on the projection, not only as percentages in a schedule. A client who can see that a one-percent difference costs them a visible share of the outcome has been advised; one who was handed a fee table has been disclosed to.

Replacement is where planning files are actually tested

Moving a client out of an existing investment, retirement annuity or risk policy is the single most-scrutinised act in financial planning, and section 9(1)(d) is explicit: where the recommendation replaces an existing product, the Record of Advice must carry the comparison and the reasons the replacement is to the client’s benefit. That is a higher bar than ordinary suitability — showing the new product is good is not enough, you have to show the client is better off leaving the old one. A defensible replacement record names each of these:

1. 01What the client gives up — guarantees, accrued or vested benefits, a preserved fee basis, loyalty additions, an underwriting position priced years ago.
2. 02The cost of moving: any penalty or surrender value, new initial charges, and the fee stack on each side stated the same way so they can be compared.
3. 03Fresh underwriting, where risk cover is involved — the client is older with a different health history, and a new exclusion is priced on today’s life.
4. 04Tax and structural consequences, including anything that changes the client’s position on withdrawal or at death.
5. 05Why, having listed all of it, the client is still better off — in a sentence a reader who was not in the room can follow.

The annual review is an advice event

Most planning relationships are ongoing, and an ongoing fee implies ongoing advice. A review that changes nothing is still advice: it concluded the existing plan remains appropriate, which is a recommendation. Record the date, what was re-examined, whether the objective or the client’s circumstances moved, and the conclusion. The files that fail are rarely the ones where the review went badly — they are the ones where a fee was charged for years and the file shows a single record of advice at inception.

Where planners and short-term brokers genuinely differ

Four practical differences, once the shared section 9 skeleton is in place:

1. 01The horizon. A short-term recommendation is re-tested every twelve months; a planning one has to survive decades, so the assumptions are part of the record.
2. 02The counterfactual. "Do nothing" is a real option in planning and is rarely one in short-term insurance — if it was considered and rejected, say why.
3. 03Compounding costs. A percentage that looks small is a large number over the term, and the record should show it as a number.
4. 04The client’s own products. A planning client usually arrives with existing funds and policies, which turns most recommendations into replacements — and into section 9(1)(d) records.

Keeping it

Section 18 of the FAIS Act requires advice records to be kept for five years, running from the termination of the product or the rendering of the service. On a retirement annuity taken at 35 and drawn at 60, that clock has not started — the record has to survive the whole term and every review along the way, which is a filing problem as much as a compliance one.

Frequently asked questions

Is a Record of Advice required for financial planning advice?

Yes. Section 9 of the FAIS General Code applies to any authorised provider furnishing advice — there is no separate regime for financial planners. The record must reflect the basis on which the advice was given, including the information relied on, the products considered and why the recommendation suits the client’s identified needs.

How is a planning Record of Advice different from a short-term one?

The section 9 requirements are identical. The material differs: the objective runs for decades so the assumptions behind it belong in the record, costs compound and should be shown as figures rather than percentages, and most planning recommendations replace an existing product, which brings section 9(1)(d) with them.

What must a replacement Record of Advice show?

The comparison and the reasons the replacement is to the client’s benefit — what they give up (guarantees, vested benefits, a preserved fee basis, an old underwriting position), the cost of moving, any fresh underwriting, the tax consequences, and why they are still better off.

Does an annual review need its own record?

A review is advice, including when it concludes nothing should change. Record the date, what was re-examined, whether the objective or circumstances moved, and the conclusion — particularly where an ongoing fee is charged.

Do I have to put the fees in the Record of Advice?

The remuneration disclosure is required, and over a long horizon the fee stack materially changes the outcome, so the defensible version shows the advice fee, platform fee and fund charges as figures and as their effect on the projection — not only as percentages in a schedule.

How long must a planning advice record be kept?

Five years under section 18 of the FAIS Act, running from termination of the product or rendering of the service. On a retirement annuity that clock starts decades after the advice, so the record has to outlive every review in between.

This page is general information about FAIS record-keeping, not legal, compliance or financial advice.

Sources

1. 01General Code of Conduct for Authorised Financial Services Providers and Representatives, Board Notice 80 of 2003 as amended to Board Notice 706 of 26 June 2020 — sections 8 and 9 (consolidated text hosted by Masthead)
2. 02Financial Advisory and Intermediary Services Act 37 of 2002 — section 18, Maintenance of records