Financial advisers need to be better at piecemeal advising to help focus on issues that clients are facing and to be compliant with the regulators, according to an adviser.
Skeggs Goldstien adviser, Adam Goldstien told a session at the SMSF Association National Conference last week that advisers needed to develop a better engagement, understanding, diagnosing processes, along with scoping and advice preparation skills.
Goldstien pointed to the Financial Adviser Standards and Ethics Authority (FAESA’s) guidance regarding scope or limit when it came to giving advice.
“Not many financial planners today are giving a full statement of advice (SOA) – it just doesn’t happen. Every SOA is scope in some form or fashion down to what needs to bespoke,” he said.
“We need to get better at scoping so that we are focusing on issues and giving advice and information to clients that they need at that point in time. The population wants piecemeal advice not whole financial plans.”
Goldstien said advisers needed to start using more scope or limited advice documents such as strategy or dispatch papers which were delivered in a diligent, fair, and reasonable manner.
“There is nothing wrong with you preparing a discussion paper with clients with alternatives, advantages, disadvantages, costs and benefits and not giving specific product recommendations,” he said.
“You don’t have to do an SOA in every event – you can write that later. The point is that you need to get clients engaged so that we can understand these unmet advice needs.
“I believe scoping is the key here and if we can get that better, and I don’t think advisers haven’t been particularly good at that, giving scope piece advising would give a better outcome.”
Comments
Whilst I agree with the notion, it is difficult in practice due to cost. Scoping out items for a new initial advice client, raised regulatory issues - if you scope out something the regulator says you should have scoped in, you have a problem - so why not start with comprehensive and then scope further advice. Then the cost, to do a strategy paper as suggested and then a scoped advice, effectively ends up being the same, if not more, cost and time wise, so why not just do the comprehensive and cover your regulatory risk?
I just couldn't agree with this less. Clients clearly don't know what they don't know and what we are good at is providing the big picture for clients. That is what holistic advice is all about.
tend to agree in the majority of cases
Bozo & Rangfee, in my defense the presentation was particularly focusing on two Trustee Profiles that aren't engaging advisers, largely due to cost and their requirement/preference for piecemeal advice. The problem is the current arrangements are not working for everyone, with more than 315,000 unmet advice needs in SMSF alone (Vanguard Investment Trends Report 2019) and many millions in the general public (Michael Bloomfield Investment Trends). Not everyone needs or requires full comprehensive advice, of course as an adviser we must satisfy our obligations under 961B and make reasonable inquiry to identify advice needs, and disclose the risks of not addressing them.
All personal advice is scaled or limited to some extent, RG244 offers a 'triage'approach to decide on the advice scope. FASEA also requires advice delivery to be 'diligent, fair & reasonable and represent value for money' - in my view better and compliant scoping is the answer,
Anyway, just my view.
Cheers
Fair enough Adam, and I understand the problem of unmet demand. I just think it is an increasingly difficult line to tread, but that's what we do every day, make trade off decisions. Cheers.
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