Among the recommendations in the Quality of Advice Review (QAR) final report, QAR reviewer Michelle Levy said the removal of statements of advice (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.”
Speaking at the Financial Advice Association Australia (FAAA) Roadshow in Sydney on Monday, Shail Singh, the newly appointed lead ombudsman for investments and advice at the Australian Financial Complaints Authority (AFCA), said that while SOAs are important, overly long documents can reduce clarity.
“If you get a 120-page version of the SOA, it can be very hard to understand what the advice was and certainly to get to the key point of the informed consent by the consumer to understand what is being recommended to them, and the risks involved,” Mr Singh said.
“Records of advice, not records of advice in the legislative sense, but some sort of record of what was stated is important and will continue to be important when we look at the steps.”
He added that all of the other material included in the file beyond the SOA can also be just as important.
“The file notes, we talk about that all the time, all the other records of what happened to get an understanding of [the advice],” Mr Singh said.
“I think it is important that the SOA is done properly, and I think it will be interesting to see if this proposal is put into legislation, how the profession responds to it. But ultimately, if it did go to AFCA, we’re going to have to understand what was said to the consumer, and what they understood of that particular advice.”
Mr Singh had previously stated that “documentation is important”, but any decision was up to the government.
“This is a matter for government, and we will need to respond to it. We’ll be adjudicating disputes if something goes wrong, and so documentation is important to understand that,” Mr Singh said.
“Going through a step process to understand how advisers have got to a good advice standard, or a best interest standard, will remain something that we need to look at.”
