SOAs set to grow as platform choices fall under best interest duty

Planners will need to give reasons for their choice of platforms as well as the underlying investments in their Statements of Advice (SOA) to ensure they are meeting Best Interest Duties for their clients under new regulations relating to platforms.

The Australian Securities and Investments Commission (ASIC) released an update to Regulatory Guide 148 (RG148) in June, with The Fold Legal managing director Claire Wivell-Plater stating that while RG148 was expected to be about platforms it also contained regulatory guidance for advisers who use platforms.

"We discovered the guidance around platform recommendations while reviewing RG148 on platforms. It outlines significant precautions advisers must take when selecting and recommending a platform. It also underscores the need for licensees and financial planners to be right across all the regulatory guides at all times," Wivell-Plater said.

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In RG148, ASIC stated that "the Future of Financial Advice (FOFA) reforms are aimed at improving the quality of financial product advice".

"The reforms introduce new requirements that advice, including about using a platform, be…in the best interests of the client and prioritised in the interests of the client if there is a conflict between the client's interests and the interests of the adviser…," RG148 stated.

As a result of this requirement, Wivell-Plater said that SOAs will need to cover the variety of implications the platform may have on the client and contain enough information to enable the client to assess whether to use or switch platforms.

Wivell-Plater said planners using a platform for client investments will need to consider adding to their SOA the reasons why they chose the platform, as well as what features and services of the chosen platform were suited to the needs of the client.

Further details to be included, according to Wivell-Plater, should be what investments are available on the platform and how they are selected and suitable for the client, as well as fees and costs associated with the platform and how they are related to the investment and advice fees.

However, Wivell-Plater said the SOA should only present these as headline figures, as full costs of the platform and investments should be detailed in the relevant IDPS Guide and product disclosure statements accessible to the client.

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