What does a ‘fit-for-purpose’ SOA look like?

statements of advice advice documentation quality of advice review

27 June 2023
| By Laura Dew |
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Six industry experts have shared their views on what a ‘fit-for-purpose’ statement of advice could look like.

Earlier this month, the government announced it would get rid of statements of advice (SOAs) and replace them with a new type of documentation that was fit for purpose.

“Statements of advice will be replaced with an advice record that is more fit for purpose, with consultation to determine the final design of the replacement,” the government’s formal response to the Quality of Advice Review (QAR) said.

QAR reviewer Michelle Levy had previously 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).

The government would now undertake consultation on what the final design of this documentation could look like.

Last week, Money Management wrote how new types of SOA could see the increased uptake of video SOAs.

Six industry experts have shared what they thought this could look like in the future:

Patrick Flynn, advice innovator at Simply Kaizen

“A ‘short-form’ document would still have a mandated ‘in writing’ component but could be supported by other resources with a clear view to incorporate by reference and enabling the process to be supported by other record-keeping (recordings, file notes, etc.).

“Capturing client goals, ensuring the clients understand the key concepts, and discussing risks and trade-offs could all be better suited to a recorded verbal delivery so long as all advice doesn’t need to be delivered at a single point in time.

“Conceptually, in digital user interface design, ‘progressive disclosure’ is a powerful tool to ensure users aren’t overwhelmed at any point. A ‘short-form’ advice record could achieve much of this.

“We would love to see advice tailored to the risk of the advice, considering the risk to the client in particular.”

Andrew Whelan, CEO of technology group DASH
 
“We now have the opportunity to turn the document into a client-first, non-fearful document that the clients will actually read. They will value it, and they will revisit it over the years as the benefits of the advice take shape. A future advice document should be a digital asset that becomes a portal for adviser-client collaboration.

“In a post-QAR world, every single paragraph should directly relate to the client and the advice. It goes without saying, the document should be far shorter, far more direct, and far more customised. What does this look like? More charts, more goals-based scenarios, more exploration into what the client’s life could look like when meeting these goals.

“Creating a genuinely tailored document might take the same amount of time as the current 100-page regulated document, but the value for all involved will be far greater. The knock-on effect is that the advice will more closely reflect the client meeting and the relationship the adviser has with the client. Given the focus can now shift to accurately reflecting a relationship, the advice document preparation may well shift from the current form, which is effectively template warfare.” 

Damon Riscalla, national head of practice development at Betashares

“The Australian Financial Complaints Authority (AFCA) estimates an SOA should be 20 pages or less. A shorter document will be more likely to be read by consumers and should lead to a reduction in implementation fees. 

“With less time spent on document production, advisers may be able to see more clients, including those with lower balances. Reviewing document production should encourage innovation in the way information is relayed to consumers, making it far more interactive.”

Joel Ronchi, chief executive of Fourth Line

“The recommendations an adviser makes (strategy + product) should always be based on the reason the client sought advice in the first place (SMA = subject matter of advice) and the client’s situation (CRC = client’s relevant circumstances), and the actual advice focus at a given point in time (the scope) is dependent on the client’s needs and the adviser’s professional judgement.

“If we keep this in mind, then the document used to deliver the written record of the advice shouldn’t matter because the evidence retained on the client file by the adviser is what will be scrutinised to determine if the advice is appropriate, in the client’s best interest, and high quality. As such, it doesn’t matter what tools are used or the format the advice is delivered in, so long as the equation is followed.

“Advice oversight will likely shift from a focus on the SOA to a focus on the advice creation process, as evidenced by the client file.”

Jackie Bennett, head of operations at Clique Paraplanning

“We believe having a shorter document and access to presentation resources will assist with keeping clients engaged during the meeting and give the adviser less clutter and pain points.

“A short client-friendly document (digital or word) showing who, what, how, why and how much is all we believe a client should be presented with, but alongside this, the adviser should also have a secondary document showing the workings on how the recommendations have been reached. 

Jason Andriessen, consulting partner at MYMAVINS

“For clients, SOAs serve three purposes: they inform the client so they can decide on the advice; they are also a useful prop to use when discussing the advice with third parties: the spouse, accountant, or a trusted friend; and SOAs act as a kind of insurance policy providing protection should things go wrong in the future.
 
“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. But it doesn’t need to be paper-based. In most cases, a video recording properly indexed and time stamped will suffice.” 
 

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Submitted by Sam P on Tue, 2023-06-27 10:40

What a disaster......

Submitted by Sam P on Tue, 2023-06-27 10:41

What a disaster.....

Submitted by Neil M on Tue, 2023-06-27 11:24

In reply to by Sam P (not verified)

Not a disaster - a great opportunity for us to collaborate while we have time, to get a great outcome for clients, advisers and the broader industry.

Submitted by Neil M on Tue, 2023-06-27 10:58

The QOAR is a great opportunity to think carefully about what the client wants, how we can demonstrate that our advice meets their needs, maintain a record of that advice for compliance, etc. The government response does not require an SOA or an 'advice document'; it refers to an 'advice record'.
We have got so used to SOAs that this is a great opportunity to 'zoom out' and look at the intent and ask ourselves: What 'artifact' of our advice do we provide to the client? It could be a document, access to software or a portal, a video, a presentation, etc.

Submitted by Jack Doff on Tue, 2023-06-27 11:03

Funny how of the six industry experts used, none of them is actually a financial planner who is presenting these things to clients. Who do you think would be more expert in how the clients interact with the SOA document than the planners presenting them. It seems our legislation is always written by people who know very little about how financial planners actually do their job and what clients want.

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