SoAs are alienating clients

Statements of advice (SoA) have become big, alienating, and defensive documents that are more likely to increase the anxiety of consumers who are accessing advice for the first time, according to a panel.

Speaking on the Financial Services Council’s (FSC) webinar on financial advice, the council’s policy manager for advice, Zach Castles, said SoAs bombarded people and created more anxiety for first-time advice users rather than reduce financial anxiety.

“We’ve got to look at ways of having a more scalable or improving that aspect of the process so that they feel needs are being met so that it is broken down so that consumers understand rather than serving up quite comprehensive paperwork that could be high quality but missed in quite fundamental consumer awareness,” Castles said.

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Also on the panel, research consultancy Pollinate’s head of society, Pamela Souvlis, said consumers saw huge amounts of documentation as just fine print to help firms cover themselves.

“They don’t relate to a huge amount of documentation with trust – that’s the misconception,” she said.

“There’s two types of trust, there’s the confidence trust – is this person skilled, qualified, is there a professional and regulatory body behind them? And then there’s relational trust.

“Trust is a big bucket and a whole lot of documentation does not necessarily build that trust. There are probably better ways to get consumers to get a sense of trust and feel their backs are covered other than a whole lot of documentation. Frankly, most of it is hard to read and not clear.”

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I don't see doctors, pharmacists, accountants or lawyers issuing statements of advice. We have the exam, the quals, the code, more CPD than any other profession... so why do we still have SOA's? They need to be scrapped along with ROA's. At the very least for non-vertically integrated advisers and situations where there are no commissions.

I was happy with your comment until you mentioned, professions and accountants in the same post.

I am happy with providing a detailed SoA, at considerable time and cost to all parties, and this should remain so as an ongoing requirement (it is the law after all). This is what differentiates real professional financial planners and accountants (who only require a diploma to be a "qualified accountant") amongst other professionals.

Real Professional financial planners provide justifications for their recommendations in writing. our recommendations must be in the best interest of the client (legal requirement s961B(1), are researched and we are held to account for any deficiencies.

This is a higher bar than all other professions -even the revered doctors- with whom we are often compared to, have a lower qualification (that is, a 4-year baccalaureate degree at AQF7), pharmacist 4-year baccalaureate degree (AQF7), and accountants, diploma at AQF 5)

we are required to hold a graduate diploma minimum at AQF8 and pass an ethics exam with credit, many of us hold an AQF 9 qualification and have achieved a higher qualification than any other profession most of whom require a qualification at AQF 7 or less. Lawyers (for example in NSW) only do a bachelor's degree and 10 hours of CPD per year.

lawyers and accountants - with the latter - tend to be the least qualified persons (both personally and professionally) that I have had the displeasure of teaching over the last 21 years.

so let's not stoop to a lawyer or accountants level and wing it.

finally, the FSC is trying to get rid of the SoA because it is a chokehold for their members to push their own product and they know it is going to be a huge issue as the supply of financial planners is dwindling fast.

this self-interested mob has only one goal, to push their product, and we highly skilled, and professional financial planners must do everything to maintain the SoA in place so that we put a chokehold on them because it is in the public interest.

how does choking feel on your own creation FSC?

we are now in charge friends, we have the market and everyone by their balls and we can swing it any way we like. let's see how anyone gets personal advice without going through us the last few remaining.

we can then hike up our fees. we will get our due so hang in their friends our time will come, and everyone will pay. they have to. I demand it.

cfp m.fin plan and fasea passed adviser

P.S. so, no George, if it is an inconvenience to members of the FSC to provide an SOA, that is their problem, not mine. if it costs more, then that is fine.

P.S.S. post qualifies for 1 CPD point, feel free to use any of the above to send to any accountant, lawyer, or doctor to educate them

Dear CFP. I'll defend my Accounting and Lawyer friends. Pretty Sure those Accountants or Lawyers don't belong to an Association that gets payments from Product Manufactures via the Professional Partner Program. Those Accountants don't belong to an association that charge members different fees because of whom they work for. Those Accountants don't belong to an Association where the members get their fees paid for them because their product manufacturing employer pays it in bulk.
Can I suggest you are the one that is unprofessional being a member of the FPA and you are the problem, and your association is contributing to bulky and lengthy SOA's.

Hard to believe the FSC needed to pay some Captain Obvious consultants to figure this out.

The current regulatory regime is not protecting consumers. It is destroying professional advice. Yet Jane Hume just laughs about it.

SoA's (Statement of Advice) are in reality AcM's (Arse Covering Memo's) designed to protect Financial Advisers from malicious vexatious regulators and lawyers looking to create a cause of legal action against a small business person (i.e. a local suburban Financial Adviser). Fancy regulations whereby a Financial Adviser can cop 5 years in prison for "inadequate record keeping". As a result, SoA's are now designed to protect Financial Advisers from this. Paralysis by Regulation.

Keep it Simple: mandatory maximum pages: 10 page PDS, 5 page SOA & 1 page ROA.

I've been saying for years that SoAs and RoAs do nothing to aid in helping clients. Conversely, they prevent us from seeing more people due to the unnecessarily long-winded nature of the documents. As long as we have saved our research and information on which we have based the advice, this should be sufficient in and of itself. The client only needs to know the costs and why it would be better for them. Anything else should be on an 'as needed' basis. The client requests financial modelling? Done. They want a pictorial view of the proposed rebalance? Done. At least we're then providing something someone wants, rather than filling up a document with superfluous charts and text.

Now that all commissions (other than risk) have been banned, along with volume bonuses and other so-called conflicts of interest, there is no need for an SoA, unless the client wants one.

As George Orwell mentioned above, we don't see doctors, pharmacists, accountants or lawyers issuing similar documents, so why does this industry have to cling on to this vestige of the past?

It's death by a thousand cuts.

How would meet the Asic reg guides requirements if you are limited to 5 page docs? The regs drive the SOA results.

The "regulations" are punishing clients - they are now forced to pay for a document they can't be bothered reading. Even worse, if they were to read the document, they would realise that it is an "all care and no responsibility" document designed to protect the AFSL and AR in order to keep ASIC at bay.

it follows then that either the law or the regulations need to change.

financial planners cannot do either.

change the law and regulations if they are not fit for purpose. but it's not the role of the financial planner to change the law.

we have already told those in charge, they do not listen.

hike up your fees, trust me, most of you are fighting a losing battle and being resentful and not charging enough for your work and doing all the work required by legislation, charging little, making no money, and then resenting clients for it. that's not fair.

do barristers complain about how high their fees are or how much it costs them into buying into chambers. nope.

turn it around, charge high fees to cover your costs and make a decent profit, tell your clients the best financial planner (you) is a profitable one.

they will love you, and want to pay high fees. there is no going around this.

have been a practitioner for 21 years, all clients are high-income professionals who I charge as much as they charge others, they love it, I love it, everyone loves it, and they love me most of all (and I love me too)

and my wife is super happy spending money like there is no tomorrow. everyone is happy, we are all winners.

be happy, charge high fees, the regulations permit you to be profitable don't be a pauper, you provide a valuable service charge accordingly.

do you know what that idiot barrister questioning terry McMaster at the RC said when terry said he only charged $250 per hour to his internal company doing SoA reviews for his advisers, "well Mr McMaster $250 per hour is not a lot of money for a solicitors time is it"

a menial lawyer with a bachelors degree that does 10 hours of CPD, that is, a lower qualification than you thinks $250 per hour is "not much". most of you are charging less than that STOP it! you are ruining my style.

Copious SoA's originated from the very members of the FSC i.e. product floggers and those petrified compliance departments of the large (formerly) licensees. Anything the FSC proposes must be ignored. In fact, the FSC should have no say in any advice policy discussion. Look at the absolute mess it's members have created over the last decade.

spot on! see my earlier post.

if the Fsc comes up with any more prescriptions for us, we should as a profession advance exactly the opposite position. because we know from hindsight, which is 20/20 that whatever they say is detrimental to consumers and us, and therefore, the opposite of what they say is actually beneficial to consumers and therefore that is the position we should advance and implement so it is to the detriment of the fSC and their members and in everybody else's best interest.

ah ha so refreshing, I am.

whaddya mean SOA's have "become big"???...they've been horrendously overcooked volumous pizzle for well over 10 yrs!! Ever since the advent of the FSRA its been just horrible giving clients this rubbish. Clients hate it and all the other crap Advisers are forced to put them through...and all the lip service from the Libs is only fractionally easier to swallow than the outright hate of Advisers by the industry fund hugging Labor party...its a friggin mess

There would have to be over 9 regulatory bodies, codes, legislation covering Financial Advisers. AFCA, FASEA, ASIC, Privacy, AML/CTF... I'm up to page 650 before I even start giving advice.

The SOA should only contain the advice, product fees, replacement product info and adviser fees. No education material, no regurgitation of the clients own personal circumstances, no product info (that's what the PDS does), no "Key Risks and Disadvantages", no alternate strategies etc. All of that stuff should be in file notes on the client file. The SoA should say "I recommend you do this... and here's the cost". Otherwise no one is going to read them. If you're a professional it's assumed you've considered alternate options and products, why do we need to detail them in our advice document, no other profession does that.

The ROA shouldn't even exist. We see a client, give them verbal advice in the meeting, file note it and then transfer that info to a word document which then gets file noted and doesn't even get given to the client. When you tell people that's the system they laugh at how ridiculous it is.

The problem is we have ASIC saying they want to streamline things and make advice affordable but on the other hand they won't accept an annual review happened unless there's an SOA or ROA on file. They're blaming licensees for being too risk averse but at the same time performing 10 year look-backs and applying today's rules to those files. Not too mention FASEA and the extra layer that adds.

Great post, I couldn't have said it any better myself.
SOA's & ROA's are essentially documents written for ASIC / AFSL Compliance and basically unreadable. What other industry does the Government / regulator step in and dictate to customers and service providers the strict way in which their relationship must operate?
If you visit a client in hospital, provide assistance and review their situation it is not considered a review in the eyes of ASIC unless a lenghty, costly, time consuming SOA / ROA has been provided. You must provide a document to the client that they generally don't want. Reading quotes from Danielle Press and others from ASIC, it is clear how out of touch they are with what we do and the value we provide.

it's not the regulators who need to understand the value we provide consumers. it's financial planners who don't understand the worth and value of their own advice, which is often indispensable and is similar to having a hip, or heart, or lung replaced.

in Australia, people's money is the most important to them, second is their health, and we counsel and provide assistance to people with their money which is the most important thing to Australians, even more, important than their health which is only possible if they have money.

it's financial planners who undercharge and therefore are held in low esteem. if everyone raised their hourly fee to at least $500 plus GST we would be thought of as highly qualified and professional. oh the irony, do you get it? it's because we are highly qualified and professional, now we just need to charge accordingly.

the only way people at ASIC or anywhere else will change is when they get a massive fee for service quote.

undercharging and working for free is killing this profession, and me. I am suffering because of you all. please HELP me and yourself to change the perception of a lowly miserable dying financial planner.

I have increased my fees and those that are paying higher fees now are fine. The problem is that my client base is not strictly the very wealthy and therefore many cannot afford high fees. Most of the lower fee paying clients I have had to dump and there are a few very sick people I work pro bono for who need assistance (it would be loss making to charge them a fee based on the ridiculous compliance). My other problem is that I have a large business debt with huge monthly repayments, so cash flow becomes a problem if I get rid of too many clients. Your thoughts are fine if all you do is deal with the very wealthy, but not all advisers have your client base.

great work, you are a credit to the profession. well done, you offer a valuable service to people in need, and pro bono work should be a feature of every professional's work, and I am increasing the amount of pro bono work I do each year.

As a tenured, long-suffering, professional financial planner, who has the highest qualification (AQF9) than any other professional working in Australia or in the world, I have the unenviable task of determining the types of client's I accept.

the regulatory landscape is not something I have contributed to but is an existential threat lumped on me with ever-increasing burdens each year.

as an astute, and most highly qualified professional of all, my obligations are far-reaching. the greatest and most important obligation of all is for me to remain profitable and viable so that I can continue to provide my clients great service that they expect, and deserve, and supports them and helps them give effect to their life's goals, needs, and objectives.

so, my friend(s), it is the necessity for me to remain profitable that precipitates the requirement for me to select the type of clients, that is, high-income earning professionals who can afford to pay my fees.

I wish it were the case that every Ordinary Australian could afford to have their own personal financial planner, but alas it is not of my doing that this is a distant dream for many, and sadly so.

CFP. M.Fin Plan (the highest qualified professional in Australia and in the world)

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