“To earn trust, money and power aren’t enough; you have to show some concern for others. You can’t buy trust in the supermarket." – His Holiness the Dalai Lama Show
Tenzin Gyatso, the 14th Dalai Lama Photographer: Adam Berry/Bloomberg News There are just a few elemental forces that hold our world together. The one that’s the glue of society is called trust. Its presence cements relationships by allowing people to live and work together, feel safe and belong to a group. Trust in a leader allows organizations and communities to flourish, while the absence of trust can cause fragmentation, conflict and even war. That’s why we need to trust our leaders, our family members, our friends and our co-workers, albeit in different ways. Trust is hard to define, but we do know when it’s lost. When that happens, we withdraw our energy and level of engagement. We go on an internal strike, not wanting to be sympathetic to the person who we feel has hurt us or treated us wrongly. We may not show it outwardly, but we are less likely to tell the formerly trusted person that we are upset, to share what is important to us or to follow through on commitments. As a result, we pull back from that person and no longer feel part of their world. This loss of trust can be obvious or somewhat hidden — especially if we pretend to be present but inwardly disengage. And those who have done something to lose our trust may not even know it. On the positive side, trust makes people feel eager to be part of a relationship or group, with a shared purpose and a willingness to depend on each other. When trust is intact, we will willingly contribute what is needed, not just by offering our presence, but also by sharing our dedication, talent, energy and honest thoughts on how the relationship or group is working. One dictionary definition of trust is “feeling safe when vulnerable.” When we depend on a leader, family member or friend, we can feel vulnerable, and we need trust to manage the anxiety of this feeling. When trust is present, things go well; but when trust is lost, the relationship is at risk. If the level of trust is low in a relationship or organization, people limit their involvement and what they are willing to do or share. They might think to themselves, “This is all you deserve,” or, “This is as all I am willing to give.” In contrast, when the trust level is high, people reward it by giving more. But, more often than not, people feel that their distrust is not safe to share. So a leader or loved one may be slow to discover that they have lost a person’s trust. The hiddenness and personal nature of trust can be a problem for relationships, teams or organizations. How can you fix something that is not expressed or shared? How do you even know that trust is lost? Paradoxically, there must be at least a little trust in order to discuss its lack and make attempts to rebuild it, while if the loss of trust remains unaddressed, the relationship will grow more and more distant. Trust is often related to leadership and power, but it is not a given. To be effective, a leader must earn the trust of his or her constituents to ensure their participation and allegiance. Indeed, any successful relationship — whether it’s leader to follower, consultant or coach to client or the relationship between spouses, siblings and friends — relies on a level of trust that must be earned. Yet even trust that is earned can be quickly lost and cannot be quickly regained. If members of a team or relationship lose trust in each other, it takes a great deal of work to restore it. People are not quick to reinvest in a relationship where trust has been broken. They generally move on. Six Building Blocks of Trust Since trust is so important in both working and personal relationships, how can we monitor it, build upon it and heal it when it becomes frayed? It is useful to view trust as a natural response to certain qualities in a person, group or organization, and the absence of these qualities will diminish the level of trust. These qualities are:
All of these qualities contribute to the degree of trust people have for each other. If you are feeling a shift of trust in a relationship, it is helpful to assess the presence or absence of each of these six qualities. This allows you to discover what is lacking in the relationship and find ways to restore trust. To build or rebuild trust, a leader must open the conversation about the degree to which each of the six qualities are present and be open to hearing what others feel, observe and need. Of course, the leader will need some trust in the others in order to begin this process. Similarly, it takes courage in a family or personal relationship to bring up loss of trust and to request that another person modify their behavior. This may lead to learning that you need to look at your own behavior too. Trust is a two-way street, built by the behavior of each person in the relationship. Restoring Trust That’s Been Lost or Broken Trust is often lost when we feel hurt by another’s action and believe that this action (or inaction) was intentional. But by sharing our feelings with the person who hurt us, we might begin to see things differently and realize that their intention was not what we imagined. This may repair the breach quickly as misunderstandings are unraveled and communication deepens. It may be difficult to initiate such a conversation; however, given the tendency to withdraw when we feel hurt. Still, a person who is able to do this will find that they are less frequently hurt. In the same way, if we feel that we have done something to lose the trust of another, we can seek the other out and inquire about what has happened. True, this can feel awkward and risky — especially if one is a leader, parent or person of authority — and this is not something that comes naturally. But this willingness to be vulnerable can ultimately lead to greater trust because the other person feels that their own vulnerability and needs are being respected. The dynamics of trust are delicate in important relationships, and the loss of trust can be costly — not only psychologically, but also financially and in terms or work and livelihood. What’s helpful to remember is that trust is an ongoing exchange between people and is not static. Trust can be earned. It can be lost. And it can be regained.
Information Sheet (INFO 267) is for Australian financial services (AFS) licensees and their representatives who provide personal advice to retail clients. It provides tips to help advice providers comply with their legal obligations – including the best interests duty and related obligations in Division 2 of Part 7.7A of the Corporations Act 2001 (Corporations Act), and the FASEA Financial Planners and Advisers Code of Ethics (Code of Ethics) – when giving limited advice. Where this information sheet refers to a standard in the Code of Ethics, this indicates that FASEA considers the related guidance or step to be essential for compliance with the standard. This information sheet also summarises relevant guidance from Regulatory Guide 175 Licensing: Financial product advisers—Conduct and disclosure (RG 175) and Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244) on what advice providers can do to meet their legal obligations when giving limited advice. This information sheet has two sections. First, the overview of giving limited advice covers: Second, ASIC’s tips for limited advice cover: For more detailed guidance on these issues, see Where can I get more information? at the end of this information sheet. Overview of giving limited adviceWhat is limited advice?Limited advice is personal advice that does not cover all possible topics relevant to the client. Limited advice is also known as scaled, single-issue, narrow-scope, modular, piece-by-piece or episodic advice. Intra-fund advice is an example of limited advice. All personal advice can be scaled – advice is either limited in scope or more comprehensive in scope along a continuous spectrum. When considering giving limited advice, you should remember that:
Your best interests duty and related obligations when giving limited adviceThe same rules apply to all personal advice, regardless of whether the advice is limited or comprehensive in scope. When giving personal advice, you must:
We refer to these obligations collectively as 'the best interests duty and related obligations'. You must also comply with the Code of Ethics: section 921E. For more information, see FASEA’s Financial Planners and Advisers Code of Ethics 2019 Guidance on FASEA's website. Note 1: In this information sheet, all section references are to the Corporations Act. Note 2: For further guidance on the best interests duty and related obligations, see Section E of RG 175 and Sections D and E of RG 244 at 244.58–RG 244.93. Safe harbourSection 961B(2) sets out a 'safe harbour' for complying with the best interests duty in section 961B(1). If you wish to rely on the safe harbour, you must show you have satisfied all of the elements of the safe harbour discussed in RG 175 at 175.277–RG 175.371. ASIC's tips for giving limited advice relate to some of the steps of the safe harbour in section 961B(2). Our tips also address record keeping. Good record keeping is important to demonstrate that you have complied with your obligations: see RG 175.432. ASIC's tipsUse your professional judgement when identifying the subject matter and scope of the adviceTo satisfy the safe harbour for complying with the best interests duty, you must identify the subject matter of the advice sought by the client (whether explicitly or implicitly): section 961B(2)(b)(i). This is relevant to determining the scope of the advice. You will need to use your professional judgement when identifying the subject matter and scope of advice: see RG 175 at RG 175.289–RG 175.294. Identifying the client's reasons for seeking advice by asking open-ended questionsThe subject matter of the advice sought by the client may be explicit from the client's request, or it may be implicit (for example, when a client requests advice in response to a life event): see Example 11 in RG 175. You can refine your understanding of the subject matter as you discover more information about the client: see Example 14 in RG 175 and Section D of RG 244 at RG 244.65–RG 244.67. When making inquiries of the client, you should ask open-ended questions to help you identify the subject matter of the advice sought by the client: for example, 'Why did you come to see me today?' Putting your client first by declining to provide advice and referring your client elsewhere if you cannot act in the client's best interests when scoping the adviceEither you or your client can suggest limiting or revising the subject matter of the advice. However, you must use your judgement when deciding on the scope of the advice. You must determine the scope of the advice in a way that is consistent with the client's relevant circumstances and the subject matter of the advice they are seeking. After discussing the client's reasons for seeking advice, you may identify that certain topics cannot be reasonably scoped out. If the client seeks to limit the scope of advice, and you are unable to act in their best interests, or you lack the relevant expertise, you should decline to provide the advice. Note: For more detail see RG 175 at RG 175.267, RG 175.306–RG 175.308 and RG 175.330, and RG 244 at RG 244.66–RG 244.68. You should also not limit the scope of advice to exclude a critical issue that is relevant to the subject matter of the advice sought by the client because it is not a core element of your advice model. Providing personal advice requires a tailored approach for each client. Where your licensee authorisations or advice model do not allow you to provide the scope of advice required, it may be appropriate to refer your client to an adviser who does have the relevant authorisations, expertise and capacity, to address the relevant advice areas: see RG 175 at RG 175.331. If you do refer a client, keep in mind Standard 7 of the Code of Ethics regarding potential benefits that derive from a third party. For example, if you specialise in superannuation or insurance, in certain client situations you may need to consider:
In these scenarios, your advice model should not dictate what is, or is not, included in the scope of the advice. Addressing advice topics that fall outside the scope of the adviceWhen identifying the scope of the advice, you may also need to address advice topics that fall outside the scope of the advice. You should ensure that your records clearly demonstrate the reasons why certain topics relevant to the client are not in scope and why it is still possible to act in the best interests of the client and provide appropriate advice in doing so. This requires you to use your professional judgement to consider your client's relevant circumstances and explain the implications of your advice recommendations. This is because your client(s) may have competing objectives and this is one reason they are seeking advice. You and your client may agree to scope a topic out of the advice while recognising that the client will need advice on the topic at another time. You should consider how you will address that advice need now or in future, and keep records in your client's file or Statement of Advice (SOA). This helps demonstrate that you are acting in the best interests of your client. Table 1 provides examples of how you can address out-of-scope advice topics or a client's other advice needs now or in the future. Table 1: Examples of addressing out-of-scope advice topics or other advice needs
Note: See RG 175 at RG 175.289–RG 175.308 for information about the subject matter of the advice sought by the client. Communicate the service you are providingWhen giving limited advice, you need to clearly communicate the advice you are providing and the advice you are not providing, and the implications of this. For example, when giving limited advice, it should be very clear in your SOA (if you are required to give one) what advice you have provided and what advice you have not provided, the implications of this, and why you have taken this approach. We consider that limited advice will be unlikely to meet the best interests duty and related obligations if the client does not understand any of the significant limitations or qualifications that apply to it: see Table 1 in RG 244. Clear communication can help you to be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products you recommend: see Standard 5 of the Code of Ethics. Importantly, you don't need to provide advice on every advice topic that may be relevant to the client, but you do need to consider whether topics are relevant and communicate the outcome of your consideration to the client, including the implications of not providing advice on the relevant topic: see RG 244 at RG 244.90 and Examples 2 and 3 in RG 244. Note: See RG 244.87–RG 244.93 about communicating the scope of personal advice. Take active steps to identify and inquire about your client's relevant circumstances and obtain complete informationAnother element of the safe harbour requires you to identify the client's relevant circumstances: section 961B(2)(b)(ii). We consider that taking active steps to identify and inquire about your client's relevant circumstances will help you satisfy this step of the safe harbour. Making inquiriesYou can adjust the level of your inquiries to reflect the nature of the advice sought by the client: see RG 244 at RG 244.71–RG 244.73. You should ask the client all the questions necessary to identify their relevant circumstances considering the advice you are likely to provide. These questions may relate to topics that are outside the identified scope of advice: see RG 175 at RG 175.312–RG 175.315 and Standard 6 of the Code of Ethics. For example:
Revising the subject matter of adviceIf you have identified the subject matter of the advice and intend to provide advice to a client on a single issue, you may need to ask the client questions about other aspects of their relevant circumstances to satisfy yourself that you can act in your client's best interests: see RG 175 at RG 175.316–RG 175.318. Asking the client a broad range of questions does not mean you have to give the client comprehensive advice. For example, when providing advice about superannuation contributions, you should inquire about the client's goals and objectives that are relevant to that particular aspect of superannuation advice. Making these inquiries does not necessarily mean you will need to provide retirement advice now: see Example 6 in RG 244. When providing advice about personal insurances, you should inquire about and consider the client's existing superannuation and insurance policies. Where advice is provided to hold insurance(s) through superannuation, you may need to consider whether to also provide superannuation advice: see Example Statement of Advice (SOA): Limited advice (PDF 759 KB) and Standard 6 of the Code of Ethics. Note: See RG 244 at RG 244.69–RG 244.73 for information about adjusting the level of your inquiries to reflect the nature of the advice sought. Making inquiries to obtain complete and accurate informationThe safe harbour also requires you to make reasonable inquiries to obtain complete and accurate information: section 961B(2)(c). Your fact-finding process (i.e. inquiries about the client's relevant circumstances) can be either limited or expanded, depending on the subject matter of the advice sought and the client's relevant circumstances. You should consider whether the information initially provided to you by the client allows you to sufficiently identify the client's relevant circumstances. Sometimes, it will not be sufficient and you will need to make further inquiries: see RG 175 at RG 175.312–RG 175.315. You may need to make further inquiries to obtain information from:
For example, if a client says they don't think they have any insurance within their existing superannuation accounts, you need to make your own inquiries with the client's superannuation provider(s) to ensure relevant information is not overlooked. This includes reviewing the client's latest superannuation statements or obtaining authorities to inquire about the client's accounts: see Standard 6 of the Code of Ethics. Use processes and systemsYou are more likely to be able to demonstrate that you have met the best interests duty and related obligations when giving limited advice if you have adequate processes and systems in place. Note: See RG 244 at RG 244.74–RG 244.80 for information about having processes in place. Using processes and systems for scoping adviceWhen scoping the advice, you may use processes and systems to assist (e.g. fact finds and checklists). However, if your processes and systems have pre-determined questions that lead the client's instructions for advice, you risk fitting the client into a box, rather than identifying and recording their real motivation for seeking advice: see RG 244 at RG 244.77. For example, if your advice is based on a client requesting a specific level of insurance cover, it is important that you ask how the client decided on the level sought. You could ask them questions such as:
You should use the client's responses to these inquiries to form the basis of your recommendations. Designing advice processes to ensure advice strategies come firstGiving sound strategic advice is a key component of good quality advice. Product recommendations should follow, rather than direct, the suggested strategies. For example, if a client seeks advice about their current insurance cover, it may be relevant to consider the client's cash flow position before you consider a product recommendation. This is because a client's cash flow may impact how potential insurance premiums should be paid for. It may also be relevant to identify whether the recommended product should be held personally by the client or within their superannuation. It is important to consider these strategic areas first, to inform your decision about which product may be suitable for the client. Note: For further examples, see Examples 2 and 3 in RG 244. Keeping recordsYou should keep good records of your actions and the steps you have taken in relation to providing advice. This includes inquiries you have made about the client's relevant circumstances and, if relevant, your consideration and investigation of the financial product you are advising on. Note: See RG 175 at RG 175.427–RG 175.442 for information about record-keeping obligations that apply to personal advice, and Standard 8 of the Code of Ethics Your records should include:
Our tips for good record keeping, demonstrating that you have complied with your obligations, are set out in Table 2. Table 2: Tips for good record keeping
Where can I get more information?For more information, see: You can also ask a question online or call ASIC on 1300 300 630. Important noticePlease note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. Omission of any matter on this information sheet will not relieve a company or its officers from any penalty incurred by failing to comply with the statutory obligations of the Corporations Act You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.
This is Information Sheet 267 (INFO 267), issued in December 2021. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. |