What will SOAs look like post-QAR?

As part of the government’s response to the Quality of Advice Review (QAR), Financial Services Minister Stephen Jones announced that “the lengthy and legalistic” statements of advice (SOAs) will be replaced with a financial advice record for consumers that is more fit‑for‑purpose.

And while this news has been mostly welcomed, the government has only accepted reviewer Michelle Levy’s recommendation for the removal of SOAs in principle, meaning further consultation will be undertaken by Treasury to determine the final design of the replacement.

Commenting on the announcement on Wednesday, Stacey Cowan, head of advice sales at Midwinter, Bravura Solutions, said an artefact will still be required by customers and urged the government to provide flexibility in the format of this artefact.

“Bravura previously welcomed the proposal to remove the requirement to provide statements of advice and allow advice providers to issue advice in the way that best suits their customers,” said Ms Cowan.

“We agree that the maintenance of an advice record will be important to ensuring the integrity of the advice. Leading financial advice technology already offer simple and secure ways to generate file notes for customers and could be a good option for maintaining an advice record.”

Similarly, SMSF Association chief executive officer Peter Burgess said that replacing SOAs with a record of advice that is more “fit-for-purpose” will help to ensure consumers are presented with clear and concise information without unnecessary complexity.

“As we said in our submission to the review, SOAs have become grossly distorted and are not a consumer-centric document,” Mr Burgess said.

“Their content has extended well beyond the original intent and SOAs have become significantly bloated over time. They have simply become risk mitigation documents that significantly add to the cost of advice.

“Simplifying the record of advice requirements will also result in a significant reduction in the time required to prepare advice, freeing up more time for advisers to provide more relevant advice to more clients.”

Lifespan’s Eugene Serravalle also applauded the move and broadly welcomed the government’s stream one commitments.

“We look forward to hearing about the proposed implementation timeline for these reforms, as well as more detail regarding the consultation process around the design of the replacement for statements of advice,” said Lifespan’s financial planning’s compliance and general manager.

Among the recommendations in the QAR final report, Ms Levy said the removal of SOAs would increase flexibility and reduce compliance costs.

Under recommendation nine, Ms Levy said: “The requirement to provide a statement of advice (or record of advice) should be replaced with the requirement for providers of personal advice to retail clients to maintain complete records of the advice provided and to provide written advice on request by the client."

“Clients should be asked whether they would like written advice before or at the time the advice is provided and a request for written advice is required to be made before, or at the time the advice is provided.”

However, while the industry mostly agrees current SOAs are too long and legalistic, concerns have surfaced that removing SOAs could leave clients vulnerable to poor advice and unscrupulous advisers.

Speaking at the Stockbrokers Conference in May, Ms Levy suggested advisers may be assigning excessive significance to SOAs.

“People are overstating the value that AFCA and ASIC see in lengthy statements of advice,” Ms Levy said.

“ASIC has been pleading with the industry for a long time to make statements of advice much shorter and clearer. AFCA have told me in consultation that they are suspicious of the accuracy of SOAs.

“So, I’m not convinced either of them want lengthy documents. They just want some accurate evidence of advice and recommendations given, it’s not all the stuff that goes with it. How you record that is something that should be left up to the industry.”

QAR’s success depends on SOAs

BT head of financial literacy and advocacy Bryan Ashenden told ifa earlier that the success of the QAR reforms will ultimately depend on how the removal of the SOA requirement is implemented.

“We need to keep the ‘what’ to a minimum from a legislative perspective — but importantly, get it right and agree in terms of that minimum content the first time we legislate the change, so we don’t have amendment upon amendment upon amendment,” Mr Ashenden said.

“The ‘how’ is also important, and perhaps should be less prescriptive — so whether a written document like today, or a PowerPoint presentation, a video or animated presentation. Let’s try to allow for flexibility and innovation in this regard and something that is fit-for-purpose for the client.”

Aside from the redesign of SOAs, the government’s stream one reforms included a promise to scrap fee disclosure statements, eliminate the safe harbour steps from the best interests duty, consolidate the ongoing fee renewal and consent requirements into a single form, and introduce standardised consumer consent requirements to classify a consumer as a wholesale or sophisticated client.

These were sought by the associations as a package of quick wins, with the industry widely pushing for their rapid adoption.