Speaking at the ifa Business Strategy Day in Sydney on Thursday, Assured Support principal Sean Graham said current SOAs were unnecessarily long and that this could hinder clients’ ability to understand the advice they receive.
Mr Graham said the law only stipulates that eight elements be included in the document, and a lot of information included in modern SOAs can be cut without compromising the documents’ compliance.
“I think that RG90, for all its limitations, is actually telling us we can cut stuff out of our SOA,” he said.
Further, Mr Graham cautioned that an SOA that is too long or too dense may actually fail to meet the legal requirements imposed on such documents.
“Your advice has to be clear, concise and effective, and how can 60, 90 or 120 pages be clear, concise and effective?” he said.
“Your ability to hide behind the SOA, the disclosures and disclaimers and the limitations in the SOA are very limited. At the end of the day, when the issue is addressed, it’s going to come down to ‘did the client understand what they were getting’, and if the document is 120 pages, is it reasonable to expect the client would understand the advice’s implications, consequences and what it meant?”
[quote=Gerard Wilkes FCA and Financia]I know that a superfund with say $1.5 million will pay the equivalent 0.23% in my practice. Many other public superfunds charge a percentage around I per cent or more. The saving is about $11,500 per annum. In many cases SMSFs are so much cheaper and the clients have more control, the investments are often more transparent and estate planning becomes easier. Tax planning is also more flexible if the clients have control. We do not set up SMSFs unless there is good value to our clients and often the value that the client sees is mainly the cost of compliance. [/quote]
Gerard you are way out, try about .3 to.4% unless you are including ICR’s which i would doubt given they vary considerable, and what about compliance risk.
[quote=Holistic]Newsflash – accountants cannot advise as such without a financial planning license.[/quote]
yer too may times ive seem Accountants tell their clients to set up a SMSF, ( advice without a SOA ), and after the event get their Fin Planning mate to issue a SOA with a 1 hr presentation meeting, then a million bucks sits in a cash account for 5 yrs, the client doesnt even consider the fin adviser to be the adviser, they were just the person the account hand balled the job to for the SOA.
What I’ve found using programs like AdvsierLogic, COIN and Xplan is that they are made for their biggest customer. If the majority of the market is AMP, Commonwealth Bank and their white labeled AFSL, Then software makers make software work for these firms and their compliance departments. This is evidence when you compare the US market, which have more independent advisers and there advances in software. I think we’re about 5 years behind because of this lack of competition and consumers are paying more because of it. What we are seeing is Financial Planning software being limited due to a lack of competition in the advice sector. What’s needed is more independent non aligned advisers. It dosen’t help when ASIC restricts the use of the term non institutionally owned. You cannot blame advisers and I’m sick of software companies blaming advisers.
We always explain to clients that what they really need to know is in the Executive Summary at the beginning. The first 10 pages. An SoA is like a debate. We tell you what we are going to tell you, then we tell you, then we tell you what we told you.
My main beef is that dealer groups are always finding ways to make an SoA into an RoA but the amount of information that needs to go into note taking (why you thought about that amount as opposed to some other amount eg) and justifying every thought, ends up with client notes that are 10 pages long before it gets to paraplanning. How does that make for efficient business?
SOA’s are designed for the purpose of obfuscation and butt covering of dealer groups. A plain disclosure of fees and basis for advice would be sufficient. 2 to 3 pages is plenty. The rest is just filler.
Chris, maybe 8 to 10, but I like the way you are thinking.
Considering this was an IFA function, and is being reported in IFA magazine there seems to be a lot of people who clearly cant be IFAs wanting to make comment here.
If you had your own license you are the compliance department, and Sean’s message is absolutely valid.
I wish you the best when ASIC comes knocking on your door. Maybe your attitude will change a bit when you find out the hard way that your SOA and your internal processes don’t line up with ASIC rules. Ask yourself honestly, do you think your license will stand up if it was scrutinised as hard as the big 5. Make no mistake ASIC is after all advisers.
further to that, you dont want to be in a situation when the FPA have a investigation on a member its a nightmare to say the least GUILTY until proven innocent. Their interpretation of best interest is purely price based, and what is in the SOA, not interested in even looking at 10 pages of file notes to support Rationale developed over several client meeting, and not interested in what the client values unless it was noted in appointment one, as a goal. for Big Licensees its brand protection first and foremost. are the FPA still pushing everyone to achieve CFP the best recognition of Fin Planning education and professionalism, so why are they so Quiet on the FASEA issues now. mmmm i wonder.
I have nick named Sean “black caviar”. There is no doubt he is the best compliance person in the country.
I don’t disagree with anything he raises, except that’s his view and not that of ASIC who is more than happy to ban advisers at a drop of a hat. The reason why SOA’s are the way they are now is lawyers and compliance teams have got their hands on them and produced legal documents to protect licencees from ASIC. ASIC creates very ambiguous guidelines and then wonders why lawyers create a 100 page SOA based on their interpretation of these rules. Has ASIC ever spoken to a client about what they want in a SOA? Has ASIC ever talked to an adviser to understand the BID process in practice? ASIC’s role is wider than just banning advisers (or non advisers), any their inaction in this space has created this mess. If they were serious ASIC they would liaise with advisers and licencees and create a standard SOA which all advisers have to use, which meets the legal obligations and is simple enough for clients to understand and actually want to read. While they continue to refuse to do this, clients are left worse off.
RG90 shows that ASIC try to engage constructively with the industry and develop common solutions. It might not be perfect but they trying. We shouldn’t be waiting for them – we should be leading. Perhaps we have to stop looking to Licensees, Regulators, Associations and everyone else to solve our problems.
I 100% agree as well. A limited insurance SOA should not be 20-30 pages long!!
Dovers SOAs are only 10-12 pages long usually. Hyperlinks to extra information if the client wants to read it (such as Moneysmart and Ebooks). Easy to construct and ensures that when you present it to the client they know what is going on, although with my clients the advice has already been verbally discussed and it is really just a written record and disclosure of what my client already knows.
Andrew, I don’t mean to pick on your approach, and I agree that the client should already know broadly what is happening prior to the plan being presented, but the rules as I read them say it’s illegal to provide a client verbal advice prior to providing a written document.
I could be wrong, but that’s been my interpretation of the rules since I started 14 years ago. Up until the plan is written and presented, general information only. It’s a nightmare in practice but necessary to stay on the right side of the law.
Did someone just want to see their name in an article, complete waste go and speak to ASIC and the dealer groups
I understand that a ‘financial product salesperson’ would expect ASIC and ‘dealer groups’ to solve all your problems – why should you bear the costs of providing advice or invest in improving your business?. Advice professionals might see it differently and understand it’s their advice and their responsibility (not that of their Licensee). I hope you feel better after your post
Totally agree. A SoA should never be anymore than 20-30 pages at the absolute maximum..
Considering your background from a large dealer group Sean, you know that advisers do not have a say in this, please talk to the powers that be!!
It’s a pity you hide behind anonymity because you get to the heart of the issue. Conflicts, associations and corporate conservatism are three reasons why advice documents are uninspiring and often unintelligible. Perhaps the Royal Commission will echo your observations and propose some solutions.
I don’t know why you launched an attack on the person’s anonymity. Got nothing to do with the issue at hand.
Why are advisers, who are the only section of society who have to act in their client’s best interest, the only ones who have to WASTE time doing SOA’s which only engineers ever read?
You would have to be a sucker to want be a financial planner when pay roll managers can recommend their companies preferred super, car salesmen can sell life/income protection insurance and mortgage brokers can advise on the biggest financial transaction in a persons life with pretty much zero compliance zero training and no need to be degree qualified.
And don’t forget accountants advising clients to switch to their own high cost inhouse superannuation product – an SMSF.
ASIC has caused this mess by choosing to persecute financial planners rather than protect consumers.
Newsflash – accountants cannot advise as such without a financial planning license.
Newsflash – they still do and ASIC does nothing about it
Newsflash – sorry – but, accountants are exempted from obeying the law due to their ‘extensive’ education and experience
passing the accounting bodies professional exams gives them an exemption into everything – including obeying the law
please get dat right
I know that a superfund with say $1.5 million will pay the equivalent 0.23% in my practice. Many other public superfunds charge a percentage around I per cent or more. The saving is about $11,500 per annum. In many cases SMSFs are so much cheaper and the clients have more control, the investments are often more transparent and estate planning becomes easier. Tax planning is also more flexible if the clients have control. We do not set up SMSFs unless there is good value to our clients and often the value that the client sees is mainly the cost of compliance.
I have been fighting compliance on this for years. Finally have my own layout that seems to appease everyone. I put the bulk of my info on strategy comparisons, switching advice, projections, research etc in Appendices at the back and cross refer with headings in the main part of the SOA. I also have an Executive Summary, all in bullet points, that comes before Your Current Situation etc so when they don’t get past the first page I’m still pretty confident they can remember what I’m recommending, the scope etc. Taken 20 years to get this good though and I pity those who are still working off clunky templates.
Not a problem mate – the new degrees will get rid of the need for 20 years experience!! Won’t they??
Well done Anonymous, we need more advisers like you. You’ve accepted accountability for your professional advice and actually worked to find a solution. You’ve done exactly what the presentation’s focus on ‘the art of the soa’ urged more advisers to do. It’s disappointing that you have to fight with your compliance people, but maybe they’re simply not the right compliance people for you. Continue to stand behind your advice and continue to focus on your clients’ needs and you’ll minimise your risks, improve the client experience and differentiate yourself from your competitors.
No kidding…but don’t lecture us, tell the compliance departments out there in licensee land, and then go tell FOS and see what they think. Have you had a look at ASICs recent example SOA? Perhaps you should talk to them also.
exactly, go and get ASIC to agree with you, and then get FOS to agree with you and then get the compliance department to agree with you, and then come and tell me, i already agree with you
ASIC don’t ban capable, competent and ethical advisers. Capable, competent and ethical advisers don’t have problems with FOS. Advisers get banned or sued but not without very good reasons and generally because they’re not competent, capable or ethical. Don’t be mediocre because of fear.
And please tell Coin, etc the software providers who’s templates use 4 lots of headings just to tell you the table below in SoA section 2 PERSONAL – CURRENT & FINANCIAL DETAILS then subsection 2.1 says
2.1 Current Personal Situation, then subsubsection 2.1.1 says Personal Details, then the actual table also has the heading that says, what for it, it’s amazing, Personal Details.
Mate, xplan and coin will be disrupted away within the next 10 years, … watch this space.
Gerry, had you been there you would appreciate how ignorant your comments are. It wasn’t a lecture just observations from ASIC’s example SoA recognising the opportunities to change and acknowledging that compliance people and licensees have contributed to the problem. It’s easier to whinge, cower and criticise than to do anything productive but that’s what got us into this problem.
I am nowhere near ignorant. Been in the job many years and have raised this point with licensees and compliance people and they just shrug it off as if I’m the stupid one. In the end, we’re forced to write a big SOA as per the licensee guidelines, and let’s face it, the vast majority of advisers operate under a dealer group… big or small. Most FOS complaints are based on a client not understanding the risk. They complain when they think they have lost money. Too much other content in SOAs that cloud this issue. Anyway, we’re wasting our time telling advisers to re-write SOAs. They will fail internal audits. Better off they write big file notes to back the conversations with clients because one thing is certain – clients don’t write their own file notes.