After only starting at the dealer group this week as its new general manager – compliance, Phil Osborne has taken aim at calls within the industry to make the switch.
“Discussions around what to call the advice document don’t actually address the core issue – which is the unnecessary length and complexity of statements of advice,” Mr Osborne said.
“Calls for a ‘letter of advice’, while highlighting the issue, is looking in the wrong place for the cause of the problem.”
Mr Osborne has argued that the advice sector shouldn’t bother taking years to go through the process to make the change and instead follow the Corporations Act that states that a statement of advice must (not “could” or “might”) be clear, concise and effective.
“Section 947B/C(6) is as much a legal requirement as the need to act in the client’s best interests (section 961B) or to provide additional information in the event of recommending a change of financial product (section 947D),” he said.
“Yet for some reason, compliance regimes don’t seem to recognise this, instead requiring more and more to be included in the SOA – not for the benefit of the client, but for the sake of so-called ‘best practice.’
“We need to consider what is best for the client and best for the adviser.
“A purpose that a shorter document would definitely serve.”
The Financial Services Council (FSC) was one of the groups that called for the change in a white paper released last year that proposed a new framework that could reduce the cost of advice by almost 40 per cent (near $2,000).
Recommendations included removing “complex” SoAs in favour of a letter of advice, as well as abolishing the safe harbour steps for complying with the best interests duty.
What clients want is a document that is short, concise and easy to understand. I do an Executive Summary at the beginning of each SoA and I believe most clients read this and don’t bother with the rest of the document. Its also the reason that I meet with the client after they have received the SoA so that I can explain the details they may have missed or misunderstood. Compliance factors have created the beast that is the SoA but it does not satisfy clients’ needs. In the clients’ best interests, we need to be able to deliver something simple and to the point whilst covering the compliance issues and saving time. Bonus points to whomever finds the solution.
Yes, we should be focused on driving down the length, complexity and time it takes to produce the SOA (or whatever it will be called), but not the fees we charge …. We have all been forced to do more study and training and the last time I checked this generally means you charge more ….
Yes advisers love missing out on the biggest market of clients that can’t afford it. Especially the ones who would value it the most. ?
Ironic that the size of an SOA with Synchron has quadrupled in the last 12 months though….. Put your money where your mouth is.
I’m not across what a ‘letter of advice’ exactly is but as long as it significantly reduces the size and complexity of the SOA then I am for it. I had an SOA of 22,000 words last week – I essentially summarised it into one page. No client would read this and if they did they definitely would not understand one word of it. Paraplanner charged $900. Indicative of where our industry is at.
If you had an SOA of 22,000 words and then you condensed it into one page then the issue isn’t the industry but your ability to communicate on paper or you have an overzealous Para Planner who is seeking death by pixel
or more likely over zealous compliance people that want you to put every conceivable piece of information in there.
Dont forget all those alternatives the client didnt ask for…
SOA’s are produced for the Auditors – who do audits on behalf of the Licensee who is doing audits as per regulations of ASIC who is interpreting the legislation produced by Parliament.
So explain to me how it is an “overzealous Para Planner?
I am all for it being a “Letter of Advice” as long as it is a 1-2 pager that says “Do X, Y, and Z”. Leave it up to advisers to figure out how to explain why they recommend what they do……….oh and separate advisers from product providers
Yup medicos just give you the advic and make their file notes- nothing more . Why can’t we too. I think the issue is that risk and compliance folk have their feet on adviser’s throats and just don’t want to let go….lest they become redundant..
That is so true. There are a lot of ‘rent seekers’ in this industry.
But we are not a profession like medicos and it appears there are too many in our industry opposing us becoming a profession by opposing education standards increases
I’d back “education” when it actually educates – not just teaches a lot of expensive material that adds no value to the practitioner or the outcomes of the clients.
Completely agree. Why can’t we remove dealer groups or somehow significantly reduce their role. They have way too much power in our industry. A very big and largely unnecessary overhead. Reduce this = reduce the cost to advise. My other tip is to move away from the big ones.
Medicos also have more than just a 4 subject diploma course before being given a licence to practice.
Current moves to exempt advisers from improving their educational quals will be what stops any relaxation to the advice requirements. No existing adviser who was on the FAR as as 1.1.2019 needs to do a Full Degree to stay in the industry/profession. Recognition of experience and training was given with credit for two-thirds of a degree being granted and advisers only needing to do a max of 8 subjects in a Grad Diploma, and even less depending on your quals already completed.
How many subjects do plumbers, electricians etc do? They do most of their studies on-the-job because that’s the best way to learn in some professions, as it is ours. How many units of study do ASIC’s analysts and delegates do? How many do politicians do?
‘Why can’t we do that?’ …two reasons a) Medical industry: about 10 years of higher education and professional placement and a long respected industry, and b) people are far more likely to sue over their money than their health, wrong as it is.
Jeremy, I agree but having the information in a 30 page SOA will not stop people from suing and will not cause us to become a long respected industry.
Financial Adviser could work in the same way as Dr’s, but that would mean Financial Planner would be able to see many clients per day – this would be a significant change in the power of who controls FUM. Currently, FUM is largely controlled by Industry Super who are allowed Intra Fund Advice and associated charging of fees with no FDS, no Opt In, no requirements for service or advice, no BID etc.
Ever wondered why Product Providers can and Financial Planners can’t?