Financial plans remain relevant when SOAs are removed
According to Matthew Esler, co-chief executive and co-founder of fintech firm, Padua Solutions, financial plans are still necessary for clients despite statements of advice (SOAs) no longer being required.
The government revealed its formal response to the Quality of Advice Review (QAR) in June, which included replacing SOAs with a new type of documentation that is more fit for purpose. The government will consult on what the new document could look like.
Esler recommended that providing an outline to clients on how they are creating value through a financial plan will still be in the advisers’ best interest, despite the less prescriptive requirements.
“Much of the industry were wrongly suggesting the removal of the SOA or record of advice meant you weren’t required to produce the financial plan or review. They have now realised that getting rid of an SOA doesn’t mean that you’re getting rid of the financial plan or you’re getting rid of the review,” he explained.
“We are moving away from the safe harbour steps but we are still going to have best interest, and we’re now also going to have the good advice requirement.”
With clients still expecting a financial plan when they meet with an adviser, the co-founder suggests removing SOA documents will save less time than originally thought.
“You are going to need to highlight their existing situation, the benefits of the recommendations, the cost of that advice and the value your plan will create,” he added.
“As fiduciaries, it’s really important to highlight to the client what their existing situation looks like and where they are headed. Then, based on the recommendation, this is how much closer they will be towards achieving those goals.”
Utilising digital solutions within the advice space will be integral as the industry transitions with the QAR changes.
Industry experts are expecting video SOAs to gain momentum in the future, alongside the growing role of artificial intelligence in producing advice documents.
“We’re starting to see a heavy shift in focus towards technical strategy, largely as a result of the compliance environment becoming more certain, which is leading to more advisers engaging approach in the provision of advice,” Esler continued.
As the advice industry previously saw a pattern of declining numbers, the fintech professional expressed concern over whether advisers are able to offer the best technical strategies to clients.
However, financial advice technology will play a key role in offering guidance to planners on how to better implement high-quality technical solutions.
“Being able to show what the maximum quantifiable benefit of each strategy is, is incredibly powerful, and something that has never existed in the industry, but with advancements in tech, it’s something that is going to exist in the industry in the near future,” he said.
AUTHOR
Jasmine Siljic
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