One of the great recurring questions from advisers in the regulated environment is “how can I be sure that my advice will pass the test?”
It is a great question given that often the test is somewhat vague, and is applied in a variety of jurisdictions, and by a variety of “judges”. Unhappy clients have a plethora of choices from dispute resolution schemes and professional bodies complaints processes, through to litigation. In each of these domains somebody, or a group of somebodies, must assess what is at the heart of the client’s unhappiness. Is it the result of product non-performance? Is it simply an unwanted, but not unanticipated, market aberration? Is it because the adviser missed the mark and didn’t provide an appropriate solution? Is human error or pure negligence responsible?
Regardless of the forum for the dispute, and regardless of the essence of the client complaint there is a key question that lies at the heart of determining whether the adviser has done the job to a satisfactory standard or not:
Why was the advice appropriate for the client at that time?
The adviser responsibility essentially swings upon establishing a suitable course of action after taking into account the clients circumstances, instructions, and the range of appropriate choices. It is about suitability.
An adverse market outcome is not necessarily a shortcoming on the part of the adviser or the advice if it was understood to be one of the range of possible outcomes, and accepted as such. Non-coverage of an insurable event is not negligence on the part of an adviser if a deliberate decision to ignore that possibility was made by the client.
The secondary question therefore that establishes a defensible advice process is:
Can you evidence why it was suitable?
These two relatively straightforward questions are the ones that will ultimately determine whether advice passes the test of objective professionalism. In reality, they are the only 2 questions that really matter in the event of an unhappy client wanting to apportion responsibility to an adviser.