With Statements of Advice (SOAs) likely to become history next year as a result of the Quality of Advice Review (QAR), Patrick Flynn, an experienced financial advice professional, has argued that regardless of what it might be called, “we’re likely to continue using a single, definitive advice document for some time”.
In a blog post uploaded to his website, Mr Flynn argued that “just because something is misused doesn’t mean it’s bad”.
“Regardless of what may come through the Quality of Advice Review, use of multimedia, or otherwise, there will always be significant benefits in a single document that covers everything at that point in time and has a linked authorisation for signature. Whilst the name, mode, length, style, and more may change, those benefits shouldn’t be dismissed out of hand,” Mr Flynn said.
“As a powerful risk management tool, this is likely to be required by licensees and professional indemnity insurers for some time to come,” he continued.
According to Mr Flynn, what advisers need to do is consider “how to do it right” — how to produce a single, definitive advice document that benefits both the adviser and the client.
To do so, he suggested that advisers ask themselves the following questions when drafting these documents:
- Does this improve the client experience? Do clients value this?
- Does its inclusion improve risk management?
- Is the time taken to produce it worthwhile? Can we do so efficiently?
“Everyone complains about an ‘X-page SOA’, however, that’s not really the issue,” Mr Flynn said.
“The issue is an SOA that is boring, hard to understand, daunting, and hard to shortcut; an SOA that is too long.”
He explained that ultimately, if advisers work on the presumption that they want a client to actually read as much of an SOA as possible, the focus shouldn’t be on page counts.
“The focus should be on attention span,” Mr Flynn said.
“Attention span is a limited resource, and if you blow it, you’ll have them reading the first few pages of your boring document, skimming the next few, and outright skipping the rest. That’s not in anyone’s interests.”
As such, he suggested advisers explore different mediums, such as video rundowns, as well as modern document design, and noted that providing the document the day before a presentation appointment gives the client a chance to identify questions prior to their opportunity to ask them.
“Not all risks are equal. Given we only have limited minutes of client attention, every bit of text added means that we reduce the likelihood other text will be read. Or, each unlikely and low-impact risk addressed reduces the chance a client actually reads and understands a high risk,” Mr Flynn said.
“A more appropriate format would be to consider the genuine risk to the client, consider the weight applied to each, and even exclude smaller risks,” he concluded.
Regardless of the outcome of this Quality of Advice Review, anyone who things they will get away not having to do some kind of advice document (whether video or written) are kidding themselves.
I don’t think anyone is pretending they won’t ahve to. It is the ridiculous presecriptive nature of the SOAs that is the problem. All professions (yes even doctors) have to have good notes, and we shouldn’t be any different.
It’s not the SOA that’s the problem but the compliance people’s fear of what ASIC want – and they use the SOA to drive fear into advisers to ‘protect’ the AFSL…
PS. Since getting my own Licence, working with compliance people has been more pleasant.
And this is the problem “this is likely to be required by licensees and professional indemnity insurers”
Of course getting your own licence helps that out a bit, but will the risk averse culture from licensees changes after the QAR.
A more appropriate format would be for ASIC, AFCA and lawyers not to have turned SoAs into the stupid, repetitive, legal defence documents that have been forced on Advisers & AFSL’s.
Until that changes no point blaming Advisers.