Speaking to ifa following a presentation at the Xerocon Sydney conference, Change Accountants and Advisors director and chief executive Timothy Munro said lawyers are pushing dealer groups to focus too much on compliance at the expense of clients.
“FOFA has hijacked everything, because people are focusing on fees and costs and compliance. The compliance requirements on people these days are just ridiculous,” Mr Munro said.
“A lot of SOAs you get from dealer groups have so much jargon [placed] in them by lawyers – not to help the client, but just to protect the dealer group,” he said.
Mr Munro said that because of the strong focus on compliance, consumers are getting lost among the long SOAs their financial planners are producing.
“ASIC model statements of advice go to 12 pages, and every dealer group’s [SOA] goes to 30 or 40 pages. My question is: Why is that?” Mr Munro asked.
“It’s the lawyers for the dealer group, and that is why the industry is just rocking and rolling because we have got all these supposed rules to protect consumers,” he said.
FOS look at us advisers as cash cows that’s why, as marksman said, even if the adviser wins, he still loses. As the old saying goes “You won the war but lost the battle”
Spot on marksman:
To be useful in the future ,is however that the SOAs will have to lift their game (apologies for the term game) as some dont play. Because to those taken before FOS. My understanding is, it has only been a game for them!
All these comments are well-intentioned and sound reasonable but skirt around the real issue, namely that the true test of the efficacy of an SOA is where an adviser is unfortunate enough to be taken to FOS. My understanding of the present FOS regime is that if you win,i.e., have no case to answer, you lose (via FOS case fees, PI excess claimed by the PI lawyers and a higher premium for PI next time around). And if you lose, you lose big time (with similar PI problems at renewal time). Apologies to Gough Whitlam, but “God save the advice industry because nothing will save the adviser”
RG 175 requires that a SOA be “clear, concise and effective”.
Our view at Shartru is that if the document is not then it is potentially a defective document. With a good compliance culture it is easier to be compliant rather than trying to “look” compliant.
Yes Bob the BDM
How very apt of you to draw the “car sales” analogy “like how a car manufacturer operates” So very true, this finance industry is very like! It wouldn’t surprise me to what lengths these guys may go to build their rogue wealth own plans.
What was it : Failing to plan, really is Planning to fail ? I like that line…
As a planner with Dover FP I can say that Dover’s SOA are excellent , short , to the point and not filled with useless information , the Information is pertinent to the actual clients situation. I have had to use 70 page SOA with previous group and at the end of the day the client does Not read the 70-80 pages.
An SOA should be concise and accurate to the clients situation while still being robust for any audit.
I am pleased with the responses and agree completely. If it were not for the liability side of the argument I could produce an advice document on a spreadsheet which would tell the client more than most SoA’s that i have seen. Some compliance officers are incredibly finicky. We even have to repeat certain warnings or phrases several times.
Adam Passwell is right. If the ICAA has anything to do with SoA ‘s I am sure they will reduce them to a reasonable length.
A SOA documents advice for the benefit of the client! It must be brief, to the point & in plain English.
A compliant SOA demonstrates to the regulators (not the client) that an AFSL or their AR have ‘complied’ with all pertinant legs & regs. (The client wouldn’t know if the SOA is compliant or not)
Think of it like how a car manufacturer operates; i.e. they must comply with the Australian Vehicle Certification system, before a car can be registered.
Car buyers aren’t provided with industry compliance documents, just relevant information highlighting the features and benefits of the vehicle.
The real problem in the ‘advice’ industry is that ‘compliance’ is based on the ‘self assessment’ model which is benchmarked against god knows what.
Two documents. One compliance document for the regulator, the other is an SOA for the client
If you saw ASICS “model” SOA you would laugh at it because its about 5+ years old and in total contrast to all of their own Regulatory Guides and FOFA laws and other legal crap they enforce. So if the fierce leader of our industry hasn’t got it right what chance do the rest of us sheep have who look up to them!?!
Yep compliance and lawyers have a part in this but also:
– Bad advice which is easier to hide in 40 pages of rubbish
– And high fees / conflicts disclosure which is easy to bury away
– Advisers that would rather press a button and produce 40 pages than write a decent SoA
– Dealer groups who cant/won’t trust/educate their advisers to write a decent SoA
– Software providers that sell the need for a 40 page document from their software
– ASIC havent enforced the clear and concise obligation
I’ve ben pushing the clear concise argument for years. The compliance industry has hijacked the advice industry and continues its ugly unnecessary pressure working on fear. See my comments at http://www.franksmith.com.au
Only bad adviser practice requires legalese and disclaimers everywhere and advisers who allow their lawyers to cram their SOAs full of that rubbish are failing their duty if care to themselves as well as their clients. Simple statements of fact and simple discussions about what is NOT knowable are required in good SOAs – not backside-covering and attempts to hide behind complex jargon. This is NOT ASICs fault, nor that of legislation – merely an inappropriate response from those who are out of their depth. My SOAs remain simple and short and to the point. They explain in layman’s terms what can and can’t be “promised” and don’t attempt to polish the t**d but rather point the t**d out and explain how to avoid or dispose of it! But then I’m not selling product. Much of my advice to clients is about what NOT to do and how to avoid risk rather than take on more. Perhaps that’s the problem with some advisers – they are selling what should not be sold and they know it?
Maybe when dealer groups start losing FOS cases because of “overly long winded SoA’s” things will change.
Maybe software providers like Coin will also start listening. Their SoA template is 32 pages for exact same advice ASIC’s short form template is 12 pages. WTF?
Not only do long winded SoA’s waste everyone’s time & money, they fail to let the clients read a consumer friendly advice document. And that is an SoA’s whole purpose.
Why doesn’t the Financial Advice industry want to reduce costs, reduce BS SoA’s?
The Accountants AFSL will change this as they simply will not produce SoA’s with time wasting waffle. Their cut down SoA’s & reduced costs will kill us for strategic advice.
Wake up Adviser world, wake up SoA / Software producers and move into the modern world.
ASIC have been stating the need for shorter, more concise SoA’s for 4 years now. Why is almost no one listening?
I asked my Dealer Group why we had a 40 page SOA yet another Group has a 5 page Risk SOA which has been audited by ASIC and their PI Insurer has signed off on it. The answer was, “well, let’s see what happens if it goes to Court” Pretty dumb answer as there is only one PI Insurer in the market, maybe two. The “BANKS” which control most Groups just cover their backs, and couldn’t care less about the adviser
Gee, Tim, thanks for pointing out the bleedin’ obvious. This matter has been raised and ignored countless times before and has been an ongoing thorn in the side of thinking advisers for the past 15 or so years. Several years ago, at the request of the industry, ASIC produced a laughable example SOA crowing that it was only 10 or so pages. Well, that’s because it did not include any legal disclaimers, “weasel words” (their phrase, not mine), warnings, risk statements, etc., that our PI insurers require before they will even consider insuring you. And having PI cover is a condition of your AFS licence, so round we go in circles once again. If ASIC would indemnify advisers for removing these PI insurer requirements, then we can have shorter SOA’s – but I can’t see that happening any time soon.