At the recent Insight and Futuro conference in New Zealand, Cheyenne M Walker delivered a timely and practical session titled “The Goldilocks Zone of Advice: Not Too Much, Not Too Little.” The presentation focused on the evolving art of scoping advice in a post-DBFO (Delivering Better Financial Outcomes) world, a topic that’s become central to compliance professionals and advisers navigating new legislative changes.
Why “Goldilocks” and Scoping?
Cheyenne used the Goldilocks metaphor to illustrate the importance of getting the scope of advice “just right”—not too broad, not too narrow. The session emphasised that both over-scoping and under-scoping can lead to compliance issues, client dissatisfaction, and regulatory scrutiny. Advisers were encouraged to treat the scope of advice as the foundation of their recommendations, ensuring it is clearly defined, well-communicated, and tailored to each client’s needs.
Key Themes and Practical Guidance
1. Understanding Scope vs. Scoping
- Scoping is the process of defining what advice will and won’t be provided, involving open dialogue between adviser and client.
- Scope is the documented outcome—what’s included, what’s excluded, and any limitations—clearly stated in the Statement of Advice (SoA).
2. DBFO and Legislative Change
- The DBFO reforms aim to make advice more accessible and affordable, with clearer legislative support for scaled or limited-scope advice.
- The new regime introduces a modernised Best Interests Duty, removing “safe harbour” steps but retaining the requirement for advice to be fit-for-purpose and in the client’s best interests.
3. Code of Ethics and Record Keeping
- Cheyenne highlighted the importance of Standards 4, 5, 6, and 8 of the Code of Ethics, which require advisers to act with informed client consent, ensure advice is appropriate, consider broader client circumstances, and keep accurate records.
- Clear file notes and thorough documentation of client discussions, objectives, and consent are essential for compliance and ensuring client understanding.
4. Explicit vs. Implicit Objectives
- Advisers must identify both explicit (clearly stated) and implicit (unstated or emotional) client objectives.
- Examples were provided to illustrate how missing implicit objectives can lead to inappropriate advice and potential complaints.
5. Common Mistakes and Case Studies
- Cheyenne warned against scoping advice that is too broad (e.g., “insurance” without specifying the type) or too narrow (excluding relevant areas).
- Real-world AFCA determinations were shared, illustrating how both advisers and clients can limit scope; however, advisers must always act in the client’s best interests—even if it means declining to provide advice when the scope is inappropriate.
6. Layered Advice and Trade-Offs
- The risks of “layered advice” (addressing only one area and promising to deal with others later) were discussed, with ASIC and AFCA decisions highlighting the dangers of ignoring client objectives or failing to gather sufficient information.
7. Practical Tools and Templates
- Cheyenne provided practical examples of fact finds, file notes, Terms of Engagement, and SoA inclusions/exclusions, emphasising the need for clear warnings when areas are excluded from advice.
- Advisers were encouraged to use licensee templates as a starting point, but to tailor them to each client’s specific situation.
Key Takeaways
- Subject Matter is the starting point for scoping advice—what the client thinks they need.
- Scope of Advice is what the adviser confirms is needed, based on professional judgment and compliance obligations.
- Both explicit and implicit objectives must be considered, and any exclusions must be clearly communicated with appropriate warnings to ensure transparency.
- The process is iterative: keep asking questions, document thoroughly, and use your expertise to guide clients toward the right outcomes.
How AICS Can Help You Deliver “Just Right” Advice
Are you ready to take your advice process to the next level? AICS is here to support advisers and compliance professionals with a comprehensive suite of services, including:
- Audit Preparation & Support: Receive expert guidance on audit findings, file notes, objectives, and scoping to ensure your advice withstands scrutiny.
- Training & Workshops: Access tailored training sessions on the latest legislative changes, DBFO reforms, and best practice methodologies for scoping advice.
- Compliance Consulting: Receive hands-on help with Code of Ethics obligations, record keeping, and documentation to keep your practice compliant and client focused.
- Template & Document Reviews: Benefit from practical tools, templates, and document reviews to streamline your advice process and reduce red tape.
- Strategic Advice & Remediation: Work with AICS to resolve complex client scenarios, manage complaints, and remediate advice where needed.
Contact AICS today at hello@aicsolutions.com.au. To learn how we can help you deliver advice that’s not too much, not too little—but just right for every client.
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