It is no secret the Statement of Advice (SoA) has become a time and cost burden for many advice businesses, but it looks like its days may be numbered, if the views in a Treasury proposals paper are adopted.
As part of the Quality of Advice Review, Treasury has released a paper with early plans for financial advice, after receiving input from more than 3000 advisers.
While the final report isn’t expected until December and the paper stresses these are “not final recommendations, nor are they complete”, the paper has recommended retiring the SoA completely.
“Many stakeholders have provided us with estimates indicating that the added cost is not immaterial. More importantly, we have been told SoAs are not providing consumers with what they want,” it read.
“Consumers do not want lengthy documents, they do not want templated text and they do not want documents filled with information designed to demonstrate the adviser has complied with the safe harbour,” the paper stated.
It is a sentiment we’ve heard from many advisers, who fear the client communiqué has become a legal tick-a-box exercise.
“Many people have also told us that SoAs should be shorter and that this could be achieved by reducing the content requirements,” the paper also stated. “I am not confident that reducing the content requirements for SoAs would lead to better documents.”
Instead, the proposals paper recommends advisers keep a record of advice but provide it to customers only upon request.
The SoAs of today: What the research tells us
When we speak to advisers about how they’d like to improve their businesses, the desire to cut down on SoA production time comes up a lot. In fact, more than half of advisers list process efficiencies as their key goal for 2022.
At present, most businesses (54 per cent) use Xplan for advice production, with just over 1-in-10 using AdviserLogic.
While production time varies among practices, research from Virtual Business Partners, provided to us for our 2020 Landscape Report, showed it took practices an average 13 hours to turn around an SoA.
Advisers say there are a number of variables and bottlenecks that can interrupt an efficient SoA process, including the time it takes to receive information from clients and third parties, and to ensure recommendations are well understood.
Pressure building for a new form of SoA
The Financial Planning Association has been asking already whether the days of the traditional paper SoA should come to an end.
The FPA has recently stressed that communication methods have evolved well beyond the block of text clients frequently receive and has advocated for the use of videos, icons and graphics to better express objectives to clients.
The association adds that replacing the traditional SoA hinges on technology rising to the challenge of providing real-time data to advice consumers. It also involves regulators reconsidering whether the client position and best interests belong in the SoA.
Should the consultation paper’s views be endorsed as part of Treasury’s financial advice review, we’ll see significant change ahead.
Article by:
Comments8
"A Flow Chart of recommendations, from the base of the advice to advice with reasons, to outcomes and alternatives. - Visualization for modern society and busy people! Licensees can keep the research paper if have to. Regulators should think through when making new rules and be more consistent, and not only focuses on advisers but also the entire industry as a whole. Aggregators, software and insurance providers should charge less fees, so don't force businesses and advisers into a money maker. Advisers should be on high professional and ethic standard to ensure the quality of advice. Eating on the same table, no one should starve while others are getting a takeaway."
Flow chart 15:04 on 21 Sep 22
"So we retire the SoA......and licensees require just as much information be compiled and formatted in some manner they want which will likely take as much time as we would have done in preparing the SoA. Willing to bet this takes no time or onus off advisers. 6 page document for the client - 70 page document for the licensee. "
Six of one... 10:06 on 07 Sep 22
"It has been a long held belief that the SOA is not in the best interests of the client it is merely in the best interests of the regulator and the Licencee who must answer to the regulator. Let's get back to giving well researched and efficicent advice not 90 pages of repetitive dribble that satisfies Ch7 of Corps Act. A typical client interaction should be recorded as follows. You came see me because you need guidance on XXX Here is your current position From my research here are my recommendations After the recommendations you will be in a better position because.... Here are my fees for this service. Sure we could save all our research like a doctor does and simply give prescriptive advice like a doctor does. 4-6 pages."
Peter Donovan 09:03 on 01 Sep 22
"lets simplify what we have to give everyone but like someone said above- all the research and reasoning should still be done and ready to be summarized. Please save this industry. the levy report is a great start to making this fun again and allowing us to help everyone!"
Justin daniel 16:16 on 31 Aug 22
"SOA's have been irrelevant for a decade now. "
Honest 15:36 on 31 Aug 22
"Treasury says no more SOA's...... Licensees say: 'whoa whoa whoa ease up, we will keep the 100 page SOA's to protect ourselves thankyou very much'............"
Lenny 14:53 on 31 Aug 22
"Shorten it way down to a simple high level explanation of advice, but advisors should still have all the research, reasoning, comparisons etc on file to demonstrate and support why the advice is in their clients best interest, but 99% of clients don't want the detail, just the summary and a high level view of what is happening..."
Joe 14:46 on 31 Aug 22
"you show the SOA to the client and go through it with them but ultimately it collects dust in their cupboards. I have very few clients that read it from cover to cover and come back with questions. All they want to know is the details of how we can achieve their goals, what the cost is, and how long it will all take to do. 90 pages for those answers. PLEASE. ALL the legal requirements can be completed by us and held on file but just give clients what they want, what the have asked for. Advice and help to get that advice into place."
Retire the SOA 14:41 on 31 Aug 22