As reported earlier, Financial Services Minister Stephen Jones announced this month 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 need to redesign SOAs, Adele Martin, the founder of My Money Buddy and The Savings Squad podcast, told ifa that in reality, SOAs don’t need to be anything more than two-page documents produced in graphic design platform, Canva.
“I have this dream that eventually SOAs will be a two-page Canva document that you generate in Canva, that is pretty easy for the client to understand. Lots of pictures. It doesn’t have to be this ridiculous 100-page legal document,” Ms Martin said at the Adviser Innovation Summit hosted recently in Melbourne by ifa.
She suggested that compliance-friendly video SOAs could also be a solution to the ongoing SOA dilemma.
“Or even something that is digital. Video SOAs. I think that, you know, hopefully maybe this time next year, we’re not even talking about the need to have an SOA. Certainly, overseas, they don’t have that complexity. Like if you go to the UK or anything like that, or even the US, they’re not talking documents like this,” Ms Martin said.
“I actually saw some Canva templates that they put together for an SOA. Wouldn’t that be amazing if we could just give them like a two-page Canva template that summarises things rather than this ridiculous document.”
Last year, well before its merger with the Association of Financial Advisers (AFA) and the QAR’s SOA recommendation, the Financial Planning Association of Australia (FPA) issued a video toolkit titled the Statement of Advice Project (SOAP) to arm financial planners with the tools required to create an SOA in video format.
At the time, the body explained that the idea behind the SOAP is to push the boundaries of finding the most effective way of providing advice to clients while also keeping within ASIC’s regulations.
Aside from the redesign of SOAs, the government said it will prioritise a number of other QAR recommendations including the removal of fee disclosure statements, eliminating the safe harbour steps from the best interests duty, consolidating the ongoing fee renewal and consent requirements into a single form, and introducing standardised consumer consent requirements to classify a consumer as a wholesale or sophisticated client.
Touching on these, Ms Martin said while she welcomes the government’s commitments, it could do away with another round of lengthy consultations.
“I feel like sometimes when I watch this stuff, I’m like, they’re just saying words. Like, where is the actual action? Like, how much consultation do you need?”
ifa understand that the government has already launched a formal round of consultations with industry associations, including additional discussions around SOAs.
I applied for, and was issued with, an AFSL in 2021. This was during the two year transition to the “new” financial services legislation, which became Chapter 7 in the Corps Act.
When I designed my SOA template for my new financial advice business, I followed the description in of an SoA as set out in S947B & S947C. I recognised the requirements for the information required to be given in an SoA as following the format of the old Customer Advice Record (CAR) used by the insurance industry. I therefore designed my SoA template with the CAR in mind. To this date I have not significantly changed the format of my template, which is about 17 pages long, including the cover page, a page setting out customer rights and obligations, and an index page.
Until recently my SoA’s have been hand written into this template. I have never had a client say they couldn’t understand, or ask for more information. I have never had a client complaint about advice given.
I SAY ALL THIS BECAUSE I DESIGNED MY SOA TEMPLATE BEFORE ASIC ISSUED ITS REGULATORY GUIDE RG 90 ON HOW IT INTERPRETED S947.
The problem is and always has been:
1. Significant overreach by ASIC.
2. Significant rolling over and waving its feet in the air by FPA.
Levy recommended ASIC determine the record keeping requirements for Advice and now Jones is talking about ‘Advice Records’. Watch these faceless bureaucrats match all the time consuming activities we undertake to prepare an SOA, with the requirements for an Advice Record. The only difference – clients will receive a shorter summary. But the costs and effort required will not change one bit.
“(SOAs) will be replaced with a financial advice record for consumers that is more fit‑for‑purpose.”
Now wait for the government think groups, ASIC, the consumer groups, licensees (and their lawyers) and the associations all get together and decide what is a fit for purpose document. My bet is that it will contain so many disclosures that the document will just be very similar to a SOA but with a different name.
the traditional SOA has become an abomination after being hijacked by the above, yet they will be the ones deciding what the document looks like.