RESEARCH REPORT

Part of your role as an adviser with Jessica's firm is the ability to research recent changes in the law and the impact on the clients.

The client which is new to you seeks your advice and opinion on the recent Quality of Advice Report issued. It does not seek a detailed analysis and review of the whole report. it has specific questions that it wants answered.

This part consists of a written advice report where you will be required to provide written advice (supported by legislation, case law and where appropriate regulatory guidelines)

THE WRITTEN ASSESSMENT:

Virgin Financial Services Pty Ltd (Virgin) is a recently incorporated company that you assisted Virginia and Richard in establishing to run a financial planning business. The company does not have their own Australian Financial Services license but is a corporate authorised representative of MLC Ltd.

The directors of the Virgin are:

Virginia (the MD) and

Richard

Both have had several years of financial planning and accounting experiences and in the last 4 years they both focused on being financial advisers.

Richard is aware that taxation is an important issue in financial planning and has become registered as a recognised tax adviser as well.

Both have a good understanding of the legal requirements involved in advising clients.

They were individual clients of the firm for many years and now that they have started up a new business they come to you for advice on the following issues:

Recently the Government established a review on the quality of advice called the Quality of Advice Review by Michelle Levy.

Virginia and Richard have the following queries regarding the review:

1. What was the purpose of the review?

2. Will it achieve the aim for being able to provide advice to ensure that all Australians have access to high quality, accessible and affordable financial advice.'

3. Our average fee for the provision of advice is $3,000 to $7,500. How will the proposals affect our business model?

4. Given our fee level and assuming that many clients could not afford our fees, what type of clients should we focus on?

5. Does the Review impact on the best interest rule in s961B of the Corporations Act?

Virginia and Richard do not want an analysis of the complete Quality of Advice Review Report but just an answer to the above issues raised by them.

Required:

Please draft a response to the above queries from Virginia and Richard. In your response you are expected to analyse the relevant parts of the Quality of Advice Review as well as express and justify your opinion in relation to the matters raised by the clients.

TIPS

1. To complete the assessment successfully, you need to:

a. understand the existing law relating to financial adviser,

b. the current process of providing advice (legal and practical issues) and

c. compare that to the objective of the QAR and

d. also how the client charges for their services.

2. In looking at each of the points you need to answer the questions raised by the clients. You also need to understand how they charge

for their services and the type of clients that they service.

3. Understand the reason why this review came about (point1)

4. Understand the objectives of the review (high quality, accessible and affordable advice) point 2. How can this be achieved generally and also how can Virgin Financial Services Pty Ltd achieve this if they want to based on how they charge clients at the moment.

5. Look at the type of clients they have or service and how does the objective of the QAR affect those types of clients. (point 3 and 4)

6. Understand what is the purpose of s961B and how it applies to financial advisers. How does this relate to the objective of the QAR?

7. Some of the issues are asking for your opinion to the clients (that is still advice) Whatever you opinion or advice is you must justify it.

8. You are not writing a report about the complete QAR report. You need to find those elements of the QAR that are relevant to the issues raised by Virgin Financial Services Pty Ltd.

9. Some of the questions ask for your opinion. To give you opinion you need to know the background to the issues, the way the client Virgin Financial Services Pty Ltd runs their business and how this does or not meet the objectives of the review.

10. The key issue is to consider the objective under the QAR and how that will impact on the company's practice and whether you think they will need to change the way they earn their income to meet their objectives.

11. Whatever your opinion is in answering the 5 issues you must justify it.