Most advisers genuinely believe their clients understand the advice they receive. The challenge is not intent but being able to demonstrate that reasonable steps were taken to support and confirm that understanding. Client understanding goes beyond disclosure or paperwork. It is about whether a client has enough clarity to make informed decisions, including understanding the risks, assumptions, and consequences of the advice.

What’s required

Both legislation and the Code of Professional Conduct for Financial Advice Services 2025 require advisers to take reasonable steps to ensure clients understand the financial advice they receive.

This includes more than explaining the nature and scope of the service. Advisers are expected to support and confirm client understanding of the advice itself, including the key risks, assumptions, and consequences, so clients can make informed decisions.

Importantly, advisers and FAPs must also be able to demonstrate that these steps were taken, in a way that is appropriate to the client and the advice given.

Why this keeps coming up

Regulators have indicated through their reviews, guidance, and enforcement activity that client understanding remains an area of focus. When advice is reviewed, attention is not on whether documents were provided or forms were signed, but on how advisers checked that clients understood the advice and whether that can be evidenced.

In practice, many advice files show what information was given to the client but provide limited insight into the conversation itself or how understanding was tested. Where this evidence is missing, it can be difficult to demonstrate that reasonable steps were taken, even where advisers believe clients understood the advice.

What “reasonable steps” looks like in practice

There is no single checklist that works for every client. What is reasonable depends on the advice and the client, including the complexity involved, the client’s experience, and any additional support needs.

For an experienced client making a simple change, reasonable steps may be relatively light. For a first-time client or a complex recommendation, more explanation and checking will usually be required. What matters is being able to explain why the approach taken was appropriate in the circumstances.

Checking and evidencing understanding

Relying on questions like “Do you understand?” or on client signatures often provides little comfort. More effective approaches involve active engagement, such as asking clients to explain the advice back in their own words, checking understanding throughout the discussion, and revisiting key risks and assumptions before decisions are made.

Clear records are just as important. File notes, meeting summaries, recordings or transcripts (where appropriate), and follow-up communications all help demonstrate how understanding was checked and supported. Without this evidence, it can be difficult to show that reasonable steps were taken.

A practical next step

For advisers and FAPs wanting to strengthen how client understanding is checked and evidenced, the Client understanding: what’s required and how to evidence it module is a practical next step.

The module is available on Radar, Strategi Institute’s online learning platform, and provides structured, scenario-based CPD that advisers can apply immediately. For Radar users, completion is automatically recorded as part of their CPD history.

If you have any questions about the module or using Radar, please get in touch. We’re happy to help.