In an opinion piece penned exclusively for ifa, Eugene Ardino, CEO at Lifespan Financial Planning, issued a plea to advisers regarding the hype he believes has surrounded licensees since certain recommendations of the Quality of Advice Review (QAR) became public.
Namely, since QAR lead Michelle Levy suggested the removal of statements of advice (SOAs) in her final report released by the government in February, the advice community has been divided on whether scrapping SOAs entirely could leave clients vulnerable to poor advice and unscrupulous advisers.
Last week in his reveal of the government’s response to QAR, Financial Services Minister Stephen Jones said Ms Levy’s SOA recommendation will be accepted in principle, with further consultation set to follow to determine the design of a “fit-for-purpose” replacement.
Advisers, however, remain worried that licensees could continue to ask for complex and lengthy SOAs regardless of the government’s decision, among other things.
But Mr Ardino believes it is “highly unlikely” that licensees will try to justify their existence by conservatively interpreting new regulations and placing an extra burden on advisers – a conjecture, he said, that has been floated recently.
His opinion is that licensees have, over the years, evolved towards more of a service provider proposition, despite the resource-heavy supervisory obligations currently in place.
If anything, Ms Ardino said, the QAR reforms “could take the shackles off us”, enabling licensees to place greater focus on supporting advisers in growing their businesses, rather than supervising an unwieldy advice process.
“QAR reforms could offer more freedom for licensees to develop meaningful and valued services to advisers which includes compliance teams focusing more on building adviser competence, and capability,” said Mr Ardino.
“Let’s be frank though…even with the abolition of the SoA as we know it, there will still be a desire and a need to provide clients in certain circumstances, with written disclosure, and in some instances, confirmation of the advice provided. Furthermore, there will be a requirement to keep a record of the advice which in many cases it will make sense to give to clients when delivering advice.
“Licensees will need to build a framework for advisers, and guidance that considers advice complexity, and the disclosure requirements of that advice”.
Turning to fears and uncertainty regarding the impact the removal of SOA requirements could have on personal indemnity insurance and potential future complaints and claims, he argued “the SOA does not play a major role” in AFCA’s current investigation process.
“The file notes, interactions, and discussions between the adviser and client verify the appropriateness of the advice, not simply the advice documentation,” Mr Ardino said.
Speaking at the Stockbrokers Conference in May, Ms Levy presented a similar argument and opined that 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.”
To read more from Mr Ardino, click here.
[i]the SOA does not play a major role in AFCA’s current investigation process[/i]
That may be so for lengthy SoAs that have been fortified with complexity to defend againts AFCA and ASIC’s persecution. These days AFCA and ASIC target less well defended parts of the advice process, for an opportunity to exercise their pathological hatred of advisers. However if SoAs were simplified, they would then potentially become the chink in the armour that rogue regulators target.
Lets see how you feel when you don’t have an SOA, appropriate level of file notes and a insurance complaint with no needs analysis conducted at the time of claim. You will back peddle on these comments so fast and hard. I promise you this comment will age like fine wine and during the next royal commission.