Lesson 5: Transitioning Your Clients To IIP

When advisers move licensees, acquire a client book, or begin working with new clients, it is essential that the transition is managed carefully. These processes involve regulatory obligations under the Corporations Act, privacy laws, and professional standards.

Understanding Client Transition Scenarios

Client transition requirements depend on how the adviser obtains the client relationship. The five common scenarios include:

1. An adviser joins IIP and transitions their existing client book

2. An IIP adviser acquires a client book from another AFSL

3. An IIP adviser acquires a client book from another adviser within IIP

4. A former client chooses to retain an adviser who has moved licensees (no bulk transfer)

5. The adviser engages an entirely new client

Each scenario involves slightly different obligations relating to:

• Client notification

• Consent and engagement

• Fact finding and risk profiling

• Advice documentation

• Review timing

Understanding which scenario applies is critical to ensuring the correct regulatory process is followed.

Notifying Clients of the Transition

Whenever there is a change in adviser or licensee, clients must be formally notified.

Advisers must send a notification letter or email within three months of the transition, unless otherwise specified in a transfer deed between licensees.

The notification must clearly explain:

• The new adviser and/or licensee details

• That the new licensee will have access to the client’s personal information

• Information about privacy protections under the Australian Privacy Principles

• An offer of a review of the client’s existing strategies and products

Importantly, advisers must retain records of all correspondence, including:

• Copies of letters or emails

• File notes of phone calls

• Any client responses

Maintaining this evidence ensures the licensee can demonstrate compliance if required.

Client Consent and Engagement

When advisers take over servicing rights or begin receiving fees from a client, the adviser must ensure that the client understands:

• What fees they are paying

• What services they will receive

• Who is responsible for providing the advice

These arrangements are usually documented through:

• Ongoing Fee Agreements (OFA)

• Fixed Term Agreements (FTA)

Where advisers engage with previous clients individually (rather than through a bulk transfer), a new service agreement must be in place before the adviser begins acting or receiving revenue.

If an adviser begins receiving ongoing advice fees before issuing a new Statement of Advice (SoA), the service agreement must clearly define the services and fees applicable during that period.

Access to Historical Client Files

A common issue during adviser transitions is whether the adviser has access to the original client file and Statement of Advice.

Where the adviser does not have access to the previous client file, and no transfer deed exists between licensees, the adviser cannot rely on previous advice records.

In these situations:

• A Record of Advice (RoA) cannot be issued

• The adviser cannot demonstrate continuity of advice

Therefore, the adviser must:

• Conduct a new fact find

• Collect updated client information

• Complete a new risk profile

• Establish a new service agreement

• Provide a new Statement of Advice

This ensures compliance with section 944A of the Corporations Act and mitigates risks such as providing inappropriate advice or charging fees without providing service.

Timing of Client Reviews

Client reviews play an important role in ensuring advice remains appropriate and compliant.

When advisers transition clients to IIP, they must:

• Continue reviews according to the client’s existing service arrangement

• Offer the client the option of an earlier review if requested

Reviews must occur:

• At the next scheduled review date, and

• No later than 12 months after the transition

For previous clients transitioning individually, a review must occur within six months of the adviser taking over servicing rights.

For new clients, best practice is to commence ongoing fees only after presenting an advice document. If servicing rights are transferred immediately, an SoA must be provided within three months.

If a review is not completed in accordance with the client’s service agreement, ongoing fees should be switched off.

Fact Finding and Risk Profiling

Understanding the client’s financial situation is fundamental when transitioning client relationships.

During the review process advisers must:

Collect Personal and Financial Information

This may involve:

• Completing a new fact find, or

• Confirming and updating existing client information

Where data already exists within adviser software, a reverse fact find can be used to confirm the accuracy of the information.

A fact find completed at a previous licensee may be used if:

• The information is reviewed and updated, and

• The new licensee’s privacy declaration is provided.

Advisers must ensure the information is complete and accurate, particularly where it was originally collected by another adviser.

Completing a Risk Profile

Advisers must also confirm the client’s risk tolerance.

This can be done by:

• Completing the Insight Investment Partners Risk Profile Questionnaire (RPQ), or

• Confirming the existing risk profile where:

  • The adviser believes there is a sound basis for the existing profile

  • The profile was completed within the last three years

  • The adviser confirms the client’s risk tolerance has not changed

The adviser must align the client’s risk profile with the closest equivalent IIP asset allocation model.

Advice Document Requirements

The advice document required depends on the circumstances of the transition.

Statement of Advice (SoA)

An SoA must be provided when:

• Acquiring a book of clients

• Engaging new clients

• Significant changes are recommended

• New strategies or products are introduced

• There has been a significant change in client circumstances

• Advice involves gearing, LRBAs or structured products

Record of Advice (RoA)

An RoA may be used where:

• The adviser provided the original SoA

• The adviser has access to the client file

• There are no significant changes to client circumstances

• Advice involves no change or only minor adjustments (e.g. portfolio rebalancing)

When issuing an RoA during a licensee transition, additional disclosures must be included such as:

• The new licensee’s name and AFSL number

• Details of any licensee benefits or interests

• Updated fee disclosures, if fee sharing arrangements have changed

Approved Product List Considerations

Before transitioning clients, advisers must review all product holdings against the IIP Approved Product List (APL).

Where clients hold non-APL investments, advisers must obtain legacy approval prior to continuing advice.

This review is typically completed as part of the due diligence process when transitioning licensees or acquiring a client book.

Insurance Client Considerations

Insurance clients may not always have ongoing service agreements in place. However, where insurance clients transition to a new adviser, they must still be offered a review.

The purpose of the review is to ensure:

• Insurance cover remains appropriate and affordable

• Clients are not over-insured

• Premiums do not unnecessarily erode super balances

• Adviser benefits remain fair, reasonable and commensurate with services provided

Where appropriate, advisers may charge a fee for service for conducting the review.

Key Compliance Principles

When transitioning client relationships, advisers should focus on the following principles:

• Transparency – ensure clients understand who is providing their advice

• Consent – obtain appropriate engagement agreements before receiving fees

• Continuity – ensure client reviews continue as scheduled

• Accuracy – confirm client information through fact finding and risk profiling

• Documentation – ensure appropriate advice documents are issued

These steps help protect both the client and the adviser while ensuring compliance with regulatory obligations.