What must a Record of Advice contain?

The section 9 test in one sentence

The Code does not prescribe a form. It prescribes a result: the record “must reflect the basis on which the advice was given”. That is the sentence the FAIS Ombud reads a file against. A record that lists the product sold but not the reasoning behind it fails the test however neatly it is laid out, and a scrappy record that shows the need, the options and the reason for the choice passes it. Everything in paragraphs (a) to (d) exists to make that basis visible to someone who was not in the room.

(a) A brief summary of the information the advice was based on

This paragraph points straight back to section 8(1)(a), which requires you to take reasonable steps to obtain the client’s financial situation, financial product experience and objectives before advising. The record summarises what you learned. The Code’s own word is “brief”: it wants a summary, not a transcript of the meeting. In a short-term personal-lines file that summary is usually:

1. 01Who the client is and what they asked for — the cover they came in for, and any objective they stated (lowest premium, full replacement value, cover for a specific item).
2. 02The assets and exposures: property and its construction, contents and specified items, vehicles, and the sums insured or values you discussed and how they were arrived at.
3. 03The circumstances that change the risk: security, use, location, claims history, and any existing cover elsewhere.
4. 04Their risk profile and affordability as they bear on the recommendation — this is the output of the needs analysis section 8(1)(b) requires, not a separate document.
5. 05What you could NOT establish. Section 8(4) is explicit: if the client did not provide all the information requested, or there was not reasonably sufficient time to analyse it, the record must show that the client was told a full analysis could not be done and that the advice may be limited as a result.

(b) The financial products that were considered

Not only the one you recommended. Paragraph (b) is the Code’s check that advice was a selection, not a sale. Section 8(1)(c) frames the duty as identifying the product “that will be appropriate to the client’s risk profile and financial needs, subject to the limitations imposed on the provider under the Act or any contractual arrangement” — so the record should show both the alternatives and the limits within which you chose. In practice:

1. 01Name each insurer and product you weighed, with the material differences between them — the cover, excess structure, exclusions, waiting periods and premium (the same list section 7(1)(c)(vii) requires you to disclose).
2. 02Say why the ones you did not recommend were set aside. “Higher excess on the item the client was most worried about” is a reason; “not selected” is not.
3. 03If your licence, mandate or binder limits the range you can offer, record that limitation. A single-insurer recommendation is compliant when the file shows the client knew the range was limited and why.
4. 04Comparison must be fair. Section 4(4) prohibits comparing products or suppliers unless their differing characteristics are made clear, and bars inaccurate or unsubstantiated criticism of any product or supplier.

(c) The recommendation, and why it meets the identified needs

This is the paragraph the whole file hangs on. The Code asks for “an explanation of why the product or products selected, is or are likely to satisfy the client’s identified needs and objectives” — and the word “identified” ties the explanation back to paragraph (a). A motivation is compliant when each feature of the recommendation answers a need the record has already established. It is thin when it could be pasted into any client’s file.

(d) The element most templates leave out: replacement

Most published summaries of section 9 stop at three items. There are four. Paragraph (d) applies whenever the product you recommend replaces, wholly or partly, a product the client already holds — and section 8(1)(e) makes it your job to take reasonable steps to find out whether that is the case. Moving a client to a different insurer at renewal is a replacement. When it applies, the record must contain two further things:

1. 01The comparison, item by item, between the terminated product and the replacement: fees and charges, special terms and conditions, exclusions of liability, waiting periods, loadings, penalties, excesses, and any restrictions or circumstances in which benefits will not be provided.
2. 02The reasons the replacement is more suitable to the client’s needs than retaining — or modifying — the product they already have. “Cheaper” is a comparison, not a reason; “the existing policy excludes the flood risk the property carries and the insurer declined to add it” is.
3. 03The section 8(1)(d) disclosures that precede the record: the actual and potential financial implications, costs and consequences of the replacement, including any benefits, vested rights or guarantees that will be lost.

Give the client a copy — in writing

Section 9(2): a provider, other than a direct marketer, must provide the client with a copy of the record in writing. “Writing” is defined in section 1 of the Code to include any electronic medium that is accurately and readily reducible to written or printed form, so a PDF sent by email satisfies it. A voice recording is a legitimate part of the record — section 3(2)(a) requires systems that record verbal as well as written communications — but it is not the written copy the client is owed. The record should also be dated: the Code does not demand a client signature, and a signature is not what proves the client understood; the section 8(2) duty to take reasonable steps to ensure understanding is evidenced by what the record says was explained.

What section 9 is “subject to and in addition to”

Section 9(1) opens by making itself subordinate to two other duties, and an advice file that satisfies section 9 can still fail on them. Section 18 of the FAIS Act requires an authorised FSP to maintain prescribed records for a minimum of five years. Section 3(2) of the Code supplies the mechanics:

1. 01Systems and procedures to record verbal and written communications relating to a financial service, to store and retrieve them, and to keep them safe from destruction — section 3(2)(a).
2. 02Retention for five years after termination of the product concerned or, in any other case, after the rendering of the financial service — section 3(2)(b).
3. 03Availability for inspection within seven days of the regulator’s request, even where a third party keeps the records for you — section 3(2)(c).
4. 04Electronic storage is expressly permitted, provided the records are accessible and readily reducible to written or printed form — section 3(2)(d).

Mapping section 9 onto a short-term personal-lines template

Our free five-section Record of Advice template is built so that each section discharges a paragraph of section 9. If you use your own, check it against the same map:

Where records fail in practice

The FAIS Ombud publishes its determinations and an annual report, and the same failures recur across them. Read your file for these before you close it:

1. 01No needs analysis on file, so paragraph (a) is empty and paragraph (c) has nothing to point back to.
2. 02The motivation is “client requested” or “client’s choice”. A client can decline advice — section 8(4)(b) then requires you to record that you alerted them to the risk — but a request is not an explanation of suitability.
3. 03One product, no alternatives, no statement of why the range was limited.
4. 04A replacement with no comparison and no reason, usually a renewal moved to a new insurer on price.
5. 05Average and underinsurance never explained — the section 7 disclosure that matters most at claim stage is the one most often missing at advice stage.
6. 06Undated, or dated after the policy incepted. The record must show the advice preceded the transaction.

Frequently asked questions

Does a Record of Advice have to be signed by the client?

No. Section 9 requires the provider to maintain the record and to give the client a copy in writing; it does not require a client signature. Many FSPs obtain one as evidence of the section 8(2) duty to take reasonable steps to ensure the client understood the advice, and that is good practice — but the signature is not what makes the record compliant. What it says is.

Is a Record of Advice required for short-term insurance?

Yes. Section 1(3) of the General Code applies it to all financial services providers and representatives unless the Code says otherwise, and advice on short-term personal or commercial lines is advice under the FAIS Act. The section 9 content requirements are the same as for any other product.

How long must a Record of Advice be kept?

Five years. Section 18 of the FAIS Act sets the minimum period, and section 3(2)(b) of the Code runs it from termination of the product concerned or, in any other case, from the rendering of the financial service. Records must be available for inspection within seven days of the regulator’s request.

Can the Record of Advice be a voice recording?

A recording can form part of the record — section 3(2)(a) requires you to record verbal communications — but section 9(2) separately requires that the client be given a copy in writing. “Writing” includes electronic formats readily reducible to print, so a PDF by email qualifies; a voice note on its own does not.

Do I need a Record of Advice at renewal?

Where you furnish advice at renewal — including a recommendation to stay with the existing insurer or to change the cover — section 9 applies to that advice. Where the renewal moves the client to a different insurer, the recommended product is a replacement, and paragraph (d) requires the item-by-item comparison and the reasons the new policy is more suitable than retaining or modifying the old one.

What is the difference between the Record of Advice and the needs analysis?

The needs analysis is the section 8(1)(b) step — the analysis of the client’s information that identifies what they need. The Record of Advice is the section 9 document that records the basis of the advice that followed: a summary of that information, the products considered, and the recommendation with its reasons. The analysis feeds paragraph (a); the record is the whole of section 9.

This page is general information about the FAIS General Code of Conduct, not legal or compliance advice. Section references are to Board Notice 80 of 2003 as amended; check the current text before relying on it.

Sources

1. 01General Code of Conduct for Authorised Financial Services Providers and Representatives, Board Notice 80 of 2003 (as amended) — section 9, Record of advice; section 8, Suitability; section 3(2), record-keeping
2. 02Financial Advisory and Intermediary Services Act 37 of 2002 — section 18, Maintenance of records
3. 03Office of the FAIS Ombud — determinations and annual reports