Following the release of the first tranche of the Delivering Better Financial Outcomes reforms in mid-November, Financial Services Minister Stephen Jones said that while it’s his job to work on the legislation, it’s the licensees’ role to enforce the law and refrain from moving beyond it.
“When licensees come to me and say, ‘Things are broken, we can’t make the system work’, I say, ‘Great, I’m going to work on the [legislation], but you’ve got a big job to do as well because you are the guys that are setting the standard rules, forms, processes to your cohort’,” Mr Jones explained.
“We’re [the government] dealing with the regulators, the licensees, the product manufacturers as a group, and we say to them, ‘You can’t all say there’s a problem, and you want things to change but you won’t change the way you’re doing things as well’.”
Speaking with ifa, Lifespan Financial Planning chief executive Eugene Ardino said that the blame for excessive SOA requirements is far more on a poorly written law.
“Look, every licensee has different SOAs and different requirements, etc. I think the problem with the way the law is written and the guidance that’s been provided is pretty vague. So, licensees and advisers have probably erred on the side of putting more things in an SOA,” Mr Ardino said.
“I think the other component to this is software providers. I’m not having a go at software providers, but in the pursuit of trying to make generating SOAs more efficient and faster, they tend to become larger.
“When using an SOA-generating software you’re trying to streamline, you’re not personalising as much, and that ends up becoming a bigger document. But I would challenge that just by looking at what self-licensed advisers are doing, they’re all using software and you’ll find that I haven’t seen any correlation to suggest that self-licensed advisers have shorter SOAs.”
Mr Ardino added that, despite it being a common refrain that licensees insist on larger SOAs as a risk management measure, the reality is that a 100-page SOA is hardly a get out of jail free card.
“Licensees don’t have any interest in trying to make SOAs longer, [because] an SOA doesn’t really protect you,” he told ifa.
“If you’re in a situation where there’s a complaint made against you, or ASIC is auditing you, they’re going to look at the file. They’ll look at the SOA, but they’re going to look at the file and try to determine what actually happened. What were the facts, what did the adviser say, what did the client think, how did the client interpret everything?
“It’s fairly well accepted out there that the clients don’t read the SOA. So, at best, the SOA is not really a disclosure document. It is supposed to be, this is the tragedy of it.”
While this is the function that the SOA should serve, Mr Ardino said that it serves more as an audit tool that can explain what advice was given and why.
“In a situation where that’s perhaps been challenged, you go and look at the file, you talk to the adviser, you talk to the client and you try to ascertain, yeah, but what actually happened? And if that doesn’t line up with the SOA, well, there’s nothing you could put in the SOA to protect you,” he explained.
“The SOA goes in the bin and those external parties that are looking into it will look at whatever other evidence there is.”
The government is consulting on the first tranche of legislation until 6 December. The minister has previously said that he expects the policy confirmation of the details on SOAs and other elements of the second tranche to be released before Christmas, with further legislation to be put to consultation next year.
Financial services law does not lay anywhere near solely to blame for these ridiculous documents that yes no one reads anyway… AFSL’s are to blame and more specifically the compliance industry and software providers and other groups that have been feeding off financial planners for that last 25 years . they want to get cost of advice down ?? how about start with an industry of compliance para planners and afsl licensees that add 25 % plus to our cost of business essentially so we can legally get paid – pretty expensive remuneration service … the elephant in the room here is afsl’s and compliance .. they are scared hence why we are hearing so much from them of late .. previous head of FPA called for it and went silent suddenly … hmmm wonder why that was .. but I can tell you until we realise as a group AFSL system must go we will never be free to really service clients and do whats in their best interests
Agree…”Best practice’ wrapped up to look like regulations…
re: “It’s fairly well accepted out there that the clients don’t read the SOA”.
Just imagine a cheeky adviser handing over a 150 page blank document, knowing full well it won’t be read by the client.
Save on compliance and para-planners?
What an enjoyable profession to be involved in !!
Basically, for 10-15 years advisers have been strapped to an electric chair of legislative persecution just waiting for someone to pull the lever.
The levels of anxiety, depression and feelings of absolute hopelessness in a sea of discriminatory and manipulated legislation have been significant.
If Govt’s want a healthy, functioning Financial Services profession, then they need to understand the incredible & detrimental impact this has had and is having on the human beings involved.
Wouldn’t be Red Tape Warriors like ASIC, AFCA & FARSEA that have blown out SoAs would it.
No never.
ASIC Reg guide for short, concise SoAs is over 150 pages.
ASICs 2017 attempt at short SoAs was shown to fail ASIC & AFCA rules. They never tried after this 1 failed attempt.
Useless Canberra