By Hayley Knight
Hayley Knight recently struck a chord with her views on the length of SoA’s. Many advisers indicated that they agreed with the sentiment - but what can be done about it? With that in mind, while she still had access to “the soapbox” Hayley decided to write a follow-up piece on just that topic!
After sharing my opinion on the state of SoA’s, rather than just being a person who complains about it, I’m taking action.
From the responses I have received both privately and publicly, I think it’s safe to say that as a sweeping generalisation, Advisers are fed up. We know that a lot of SoA’s are not written with the client in mind and so I’m taking the first step in rectifying this.
We need to take a simple but effective approach and the best way I know how is via education. So, I spent some time firstly understanding the basics – what does the ASIC template actually involve? Surprisingly, it is quite simple.
The example (released May 2017) is a risk and super (contribution) SoA totalling 27 pages and the structure of this document is based on the following (apart from cover page and TOC):
- Summary of Advice
- Current situation (client data & goals)
- Recommendations (detail)
- Consequences & Risks
- Best Interest & Benefits
- Scope of Advice & Warnings (incomplete info, expiry date, cooling off, privacy)
- Implementation Steps
- Fees & Relationships
- Authority to Proceed
The structure above makes sense to me:
- How much do you know me and my situation?
- What is the advice?
- How did the Adviser come to this?
- What are the implications of proceeding (or not)?
This information is essentially all the client needs to know and ASIC have developed this structure based on behavioural studies.
ASIC have made it very clear that a SOA is not a compliance tool and the purpose should be to ensure the client makes an informed decision about the advice they are receiving. All of the other information (disclosures/disclaimers) should be left to legal documents such as the FSG and Letter of Engagement.
We don’t need to include points that have already been discussed or information on disclosures that have already been provided. For example, the FSG details the Adviser’s capacity to provide advice and the areas they are not able to advise on. This does not need to be redisclosed in the SOA provided that you have recorded the client already receiving the FSG.
They note “It is particularly important to ensure that SOAs are not too long or complicated as this detracts from the customers understanding”. Point and case regarding 50 page SOA’s.
My point is that if ASIC are giving us an example of what the SOA should look like, why is this being over complicated? It’s moving from being a client centric document to a compliance tool and it’s not good enough.
SOA’s are provided for the client to make an informed decision about the advice and when it’s cluttered with repeated disclosures and jargon, you can only expect confusion. I think the SoA from ASIC is a great starting point, sure, it needs some work, just like when you move into an old home and you make plans to renovate, but the bones are still good.
I’ve just started to scratch the surface on the possibilities for SOA’s. As with any change, it will take time, but my objective is to lead by example and simplify SOA’s so that they are easily and cost effectively produced to make financial advice a little more affordable for Aussies.
Hayley Knight is the Director of Contract Paraplanning Services (CPS). CPS was established in 2010 and is a contract para-planning service helping advisers around Australia. The views expressed in this article are her own.