Industry experts are expectant of video statements of advice (SOAs) gaining in popularity as the Quality of Advice Review (QAR) loosens rules on what advice documentation should look like.
In the formal response to the Quality of Advice Review, which was released last week, the government said it would get rid of SOAs, a recommendation that had been made in Michelle Levy’s final report and was welcomed by advisers.
Levy had advocated for advisers to “maintain a contemporaneous record” of advice provided. She suggested the decision on the type of request or framework for providing documentation is a matter for the Australian Securities and Investments Commission (ASIC).
Minister for Financial Services, Stephen Jones, stated that he would “replace the unwieldy statements of advice with something that is fit for purpose”.
This formed part of a ‘stream one’ of recommendations to remove red tape from the advice profession.
A consultation would now discuss what these documents could look like.
Jason Andriessen, consulting partner at MYMAVINS, said the potential for a new document in the advice landscape is an “exciting prospect”.
“[Fit for purpose] is something that can simultaneously inform the client, support a conversation about the advice after the meeting and be an effective record of what was agreed if things go wrong in the future,” Andriessen said.
“Ultimately, clients are seeking a short resource that effectively summarises what they are seeking to achieve, the strategic recommendations, any product recommendations, and a conclusion on how the advice meets their needs. If it were written on paper, it would be a one to three-page document.”
He said a document may not even need to be written on paper and could be a video or use artificial intelligence.
The Financial Advice Association of Australia (FAAA) had been working on offering video SOAs for over a year, but it is understood uptake is low at the moment as advisers are cautious about whether they meet compliance. However, ASIC had confirmed the Corporations Act was ‘technology neutral’ and advisers were encouraged to explore technology and innovation so long as the requirements were met.
“In most cases a video recording properly indexed and time stamped will suffice,” he said.
“Perhaps producing a video is redundant in the era of generative artificial intelligence. Clients could interrogate their digital records, asking via a chatbot for explanations of financial concepts, and inquire about the strategies recommended, any product recommendations, and how the advice will meet their objectives.”
Nathan Fradley, senior financial adviser at Tribeca Financial, said the firm was working on a video SOA project and expected to roll them out by Christmas. He recommended a new document should only need to include a summary of the advice provided, the clients’ goals, how the advice would benefit them, and their fees and charges.
“It could be four pages and then it is up to the adviser to ensure we have the clients’ informed consent rather than relying on a long SOA, which is a step towards becoming a profession,” Fradley said.
“Video SOAs are possible already, but people are worried about what is missing from them. They are very concerned about the legal side of it whereas a long document gives advisers confirmation they are OK.
“But [a long document] gives a false sense of security, they get comfort from sticking to the status quo, but the size of the document doesn’t necessarily mean more understanding by the client. There will be a steep learning curve for those advisers who have relied on long, written SOAs.”
However, Joel Ronchi, chief executive of Fourth Line, said video SOAs had been introduced as an alternative to long and unwieldy SOAs so may be unnecessary if the SOAs themselves are changing format.
“Video SOAs were really designed to overcome the fact that clients found lengthy SOAs burdensome and difficult to read. A short advice record will likely overcome these issues. In fact, it may be the case that creating an ‘advice video’ is more difficult for many advisers if a short advice record is allowed post-QOA implementation,” Ronchi said.
“Digital delivery advice will likely be the real winner as platforms build out the ability to deliver advice on the platform, backed up by a short-form advice document.”
