Speaking with ifa, Katherine Hayes, director and financial adviser at Hayes and Co Insurance Services, explained that while she’s hopeful the Delivering Better Financial Outcomes (DBFO) reforms will remove the burden of statements of advice (SOA), she has concerns about how it will play out in a practical sense.
“Let’s say we get what we want and we no longer need a statement of advice. It doesn’t mean that we won’t need to have the research and the evidence in the background. We’re still going to need that,” Hayes said.
“My concern is that licensees will still want to continue to have something along those lines purely as a compliance record for their own protection, rather than for the benefit of the client, and then we lose the efficiencies that we gained through the reforms.”
She explained that while she doesn’t think this will occur across the board, those that do will likely see many advisers changing licensees, which could lead to additional disruption in the profession.
With SOAs routinely sitting at around 100 to 120 pages, Hayes argued that “licensees are breaking the law with their SOAs”.
Specifically, section 947 of the Corporations Act requires that the information included in an SOA “must be worded and presented in a clear, concise and effective manner”.
“It’s not a wish clause saying, ‘Oh, it’s nice if it’s concise’, but actually the law states the statement of advice needs to be concise. How is a document that’s 130 and 200 pages concise? That’s not concise,” she said.
“I think it’s a problem because if you get these documents that no reasonable person would expect someone to read, you can’t have informed consent, or at least, you can’t demonstrate it through that particular document.”
Hayes added: “The only way to actually have people really read and rely on it, is it has to be concise.”
Presenting at the ifa Adviser Innovation Summit in June, Corey Wastle, chief executive at Verse Wealth, and specialist adviser Nathan Fradley discussed the current state of SOAs and the need to rethink how they are delivered.
Wastle argued that the current SOA is a result of “compliance-led thinking”, making the document unnecessarily onerous for all involved parties.
“We want to shift that, and it’s time to shift that, to client experience-led thinking,” he said.
“So instead of going, ‘How can I make sure I’m doing everything compliantly and then try and get the best experience I can within that framework’, flip it and go to, ‘Let’s give the best client experience we possibly can and how do we make that compliant’.”
Alternative options for SOAs
While many in the profession are hopeful that the DBFO measures will deliver on the promise of removing SOAs, Hayes noted that some form of documentation will still be required.
“I can understand the DBFO getting rid of a document that nobody reads, it makes perfect sense, but it doesn’t abate the need to make sure the client is informed and has all the information they need, but there are so many different ways you can achieve that,” she said.
“I would definitely see more of an opportunity to rely on PowerPoint presentation slides, video SOAs, recorded conversations. It would open up, I would hope, people being able or willing to rely on different forms of communicating with clients, rather than a centralised single document.”
Speaking at the June event, Fradley noted that “the word clear appears 47 times in RG 175, concise 27 times, the word written does not appear once”, noting that the law does not require the SOA to be a physical document, as is currently the common practice.
He added: “In fact, it says, ‘We consider the presentation requirements as important as the content requirements’. The way you deliver your advice so the client understands it, be it what most advisers are doing by getting on whiteboards, spending the time with them, getting to understand them, is as important as what’s in the statement. If your statement happens to be written, so be it.”
Offering an alternative view, Ben Neilson, a financial adviser at Complete Wealth, appearing on an episode of the ifa Show in May, questioned how many advisers had taken the initiative to make changes to SOAs themselves.
He explained that, rather than waiting for licensees or the government to make SOAs less burdensome, advisers should find ways to improve them now and take that solution to their licensees because they may very well say yes.
“Have they asked? Have they got a solution where they say, ‘This is what we’re doing and this is what we want to do, and this is the time metrics on it, and this is why we think it’s safer’?” Neilson said at the time.
“Because every time I’ve done this, on four major licensees so far, every single one of them have said, ‘If you do that, if you replace that template with this template, we would have no problems with that’.
“So, have they asked? And then also, what have they done themselves? It’s very easy for me to say it would never work, my licensee wouldn’t say yes, but have you asked?”
It’s so disappointing reading these comments. Here we have advisers sharing that it is possible now, not later, not one day in the future once some possible future exists to have a better process and outcomes when it comes to delivering more consumer friendly SOA’s. They are prepared to put their names and reputations out there, but all we have in the comments is a bunch of people who would rather whinge about their lot and make snide and uninformed remarks than actually make a change. THIS is why our industry is in peril. It’s because of people like this who voice their complaints loudly but aren’t prepared to learn. Hats off to those who are making an effort and good luck to the whingers – God knows you’ll need it!
I am actually sick of this SOA business. I sit in front of clients every single day and your “shorter SOA” will do nothing for me. As stated these attempts to peddle your services that are sold to Advisers are well short of what will bring down the cost of advice and this misdirection is doing more harm than good. This past 2 weeks alone I have 3 emails from ASIC asking me to pay some sort of Levy using two different websites.
You took the words right out of my mouth. I was very disappointed to read some of these comments here. I’d like to know if anyone commenting on such forums constantly is trying to make changes themselves to their own business, trying to work with the industry to better it, or is it just easier to go on a forum hidden from displaying your name and throw shade at individuals who are trying to make the industry all the better for EVERYONE. I doubt anyone in here has lifted a finger to do so and I’d love to see how successful their own business is with this attitude. Keep up the good work to the advisers mentioned in the article. We appreciate what you are doing to better us all.
Yes can easily write a SOA in 10 pages for the Corporations Law or deliver a video SOA. The other 50 pages are required for the Privacy Laws, AFCA determinations, and the other 10 laws and regulations that govern and regulate advice. You hand that 10 page SOA into AFCA and see how you go.
Why are they so focused on the SOA ?
Well we know these people are just self-serving, social media, attention seekers. Even if I did write a 10 page SOA, all the other red tape and regulatory requirements would not bring the cost of advice down. They’re really do harm to the Advice industry by causing this misdirection of what matters.
I would generally be interested in understanding your comments more about being self serving,social media attention seekers. Would you care to explain with examples things in particular where this has occurred to only be self serving?
I have said a couple of these said individuals on boards, panels and the like before, all with one goal to better the industry as a whole that you and I are both in. Is there anything you have done as an individual to contribute to this? I’m also not sure who on a professional forum, you would deem it necessary to post comments like this. Is this designed to be helpful or harmful?
One of Michelle Levy’s final recommendations (8.3.6) in December 2022 to only provide an ‘advice record’ essentially at the client’s request was not accepted by our current Federal Government. DBFO Tranche II when it is finally drafted will still require an ‘advice record’ to be provided to each retail client, covering four key elements. In my view, it is essentially a simplified Statement of Advice or dare I say, a Record of Advice, re-badged. Short Statements of Advice are very possible today as has been commented on, however they generally require deep, considered thinking and effort to produce a solid foundational template to use at scale. Writing concisely, yet also meeting all legislative and regulatory requirements takes effort, but doable. As a retail client, I would expect to receive something telling me for the advice fee paid, what the advice is, the rationale for the advice and its cost, to help me understand why I should implement it and how I will be better off from it. I agree, this ‘record’ whether it be a Word document, PowerPoint presentation, video etc., should not be long. I can’t however agree with no record being provided at all to a retail client.
SOA’s should be streamlined but not removed in their entirety as that act as a guidepost and protect both the retail client and advisor. Anyone who thinks otherwise shouldn’t be in the industry…
Tubbish and archaic non client centred view. They protect noone and slow the process. Make no soa default then allow creativity for optional documents.
A profession should have various methods not just the one you want. This kind of thinking is what over complicates and ultimately kills or stalls reform. Levy suggested removing the requirement, if as a profession we had supported this it would have been passed and you could still provide your guidepost. Arguing over content presentation and wording is why we are in this pathetic position. Look globally and soas are a joke
Clear, concise, and effective SoAs would be quite possible if we had fair, competent and unbiased regulators. But we don’t. Excessive licensee compliance is primarily to defend against regulators that are focused on adviser persecution, rather than consumer protection. It doesn’t matter how much they change the law if regulators misuse their power in enforcing that law.
My SOA’s are quite short (10-12 pages) and have been for years, it is very achievable. The issue is the licensees demanding more than the law requires which doesn’t provide protection, it erodes it. It’s the whole file that needs to be up to scratch, it’s never been about proving it all in an SOA. Anticipating tranche 2 will make this easier for licensees, but if they don’t, advisers will vote with their feet.
Good for you let’s call this best oractise and remember legislation is the minimum standard. No soa, like a profession. Then you want to keep providing 12pgs soas great
You’re missing the point. It’s not about providing protection from the law. It’s about providing protection from the regulators. Very different thing. You can have 100 issues covered in the client file and only mention the 10 most important ones in the SoA to keep it clear and concise. But biased regulators will fish around the other 90 things, pick out a few, and claim your advice was deficient because the client wasn’t fully informed about them. Regardless of whether the advice was in the client’s best interest.
You’re missing the point there is over regulation pi csolr and afca an soa does stuff all and is a small consideration. Remove it as a base and if you want to provide one or need to find. Like all other professions
this comment should be framed. 100% nailed it.
The file is considered as a whole by afca. Ditch the soa entirely like accountants provide documents if you wish or don’t but if a complaint or regulator comes looking have evidence. Every part of the soa needs to first be calculated or produced anyway in the fact find research modelling etc. It’s an expensive slow and entirely redundant concept. Follow levy and just scrap it, like (all) actual professions.
Sick of lawyers regulators and Rube inexperienced compliance “eggsperts” pontificating smugly around syntax. Scrap the soa and stop feeding the bloated red tape self serving anti independent advice compliance economy and asic.
I am sick of this debate. Its been going on for years. Just get on with it and make it a document that is readable for clients. If it takes longer as it’s customised then charge for this as the client will see the value. I would not eliminate SOAs – I think many people need them to follow what is happening esp the foundation SOA.
Get rid of soa if you want to provide one then add as your value prop and charge. Simple
Why would we do anything until tranche 2 of QAR is released ?
Try sitting in the dock with a lawyer asking why this or that wasn’t in the SoA.
It’s NOT about comp0liance – it’s about protecting yourself and your family legally.
Seriously – what is not to understand ??
This is a person who has 0 legal risk commenting on one word, concise. What a load of rot.
Hi Anonymous- my SOA’s are 10-12 pages on average and have been for years. I comment based on experience of what is currently achievable, but many don’t take the time to innovate- but thanks for your valuable contribution.
Whooptidoo, keep going. But don’t make this the minimum standard. It’s such a typical case of advisers shooting themselves in the foot so everyone does it their way instead of thinking more broadly at the profession and client appetite.
Very disappointed to read this comment. After reading the article, I believe the intent was from some forward thinking individuals in our industry trying to work to make it better, so that all of us benefit. Can you openly let us know what you have done as an individual (aside from posting here and making unconstructive comments). If you genuinely feel so strong about it, be involved in the change. Innovate, come up with solutions and be involved. It’s much easier to complain on a forum then to try and do something constructive.
Coming from someone that doesn’t even have the guts to put up an alias…