FNA's - Are they really necessary?

Is a full client needs analysis (FNA) always necessary when interacting with a client or can a financial adviser provide a client with the financial product on a single needs basis? Its a debate that has been going on for some time.

The FAIS Act, Section 16(1)(c) to be precise, binds an adviser, through a code of conduct, to "seek from clients appropriate and available information regarding their financial situations, financial product experience and objectives in connection with the financial service required".

The devil is in the detail
So far, no mention of an FNA, but in this statement the Act clearly requires the gathering of appropriate information and goes so far as to dictate the type of information required. Now, if one delves deeper into the detail of the code of conduct referenced above, the cause for debate becomes evident. 

Under the heading of "Furnishing of advice", Section 8(1)(b) of the "General code of conduct for authorised FSPs and representatives" the Act stipulates that the provider must, prior to advising a client, "conduct an analysis, for the purposes of advice, based on the information obtained".

Read further and in Section 8(4) of the general code of conduct, the Act spells out the situation should you not be able to undertake an analysis due to the lack of information or time. Without getting too technical, the adviser is obliged to inform the client of the downside of the analysis not having been done.

Absolute requirement?
So, based on the above, is a full FNA an absolute requirement of FAIS? Probably not, you could argue, provided the client is made aware of the potential risks that exist when not gathering all the financial facts, information pertaining to goals and objectives, risk profiles and anything else necessary to analyse the clients requirements and make appropriate recommendations. 

The real issue
But why argue? It's only through an FNA that you can deliver your services as a professional financial adviser. Anything less and youre unlikely to be able to offer the comprehensive service your clients have come to expect of you. In fact, it's not the FNA that should be in question at all. Whatever tool you use, you want the FNA to result in an appropriate set of recommendations based on the information that youve supplied.

Just how substantial and relevant is the information that you feed into your FNA tool? Facts and figures in - and facts and figures out. Thats what you can expect from any FNA tool. On the other hand, take a little extra time to truly understand your client, his or her dreams, goals and ambitions and you have substantially more information to build the analysis and recommendations. 

Real solutions
Few financial plans can be implemented without some form of compromise or goal adjustment. It's a matter of understanding where you can make reasonable modifications and still deliver a plan that encapsulates the real requirements and financial desires of your client.

There is only one way to achieve this. You have to spend time gathering information, getting to understand the deeper needs and then looking at all the alternatives so that you can come up with a solution that will fully satisfy your client. And you neednt read the FAIS Act to establish that doing so requires nothing less than an FNA.