EXCLUSIVE Statements of advice should be designed to guide the client rather than just being seen as merely part of a box-ticking exercise, according to compliance experts within the industry.
Speaking exclusively on the webcast of ifa sister publication InvestorDaily last week, Advice Compliance Support managing director Nikolas Kloufetos said there are many ways to improve the ways in which the SOA is designed and utilised.
He said that while the SOA obviously needs to be built around satisfying the compliance requirements as set out in the Corporations Act, the language of the SOA needs to be more friendly to the client.
“I'd hate to see it as just a document that the Corps Act says, ‘I need to give you an SOA. Here it is. Let's put it to the side’. It's meant to guide the customer so they can then have a free and informed decision as to how to go ahead,” Mr Kloufetos said.
Mr Kloufetos said the SOA should be more than just stating the products and their product disclosure statements. It should lay out to the client what the advice will cost, demonstrate to the client that the advice is worth the cost, and lay out to the client a map of how the advice will guide the client towards achieving their financial goals in the long term.
“It's meant to be a journey that they can take away and then maybe even look over it with their partner or whoever and say, ‘Look, this is where we're at. When do you think we should go see our adviser again?’,” he said.
“Because clients are becoming more involved. They're becoming more confident and the more they know the better they can manage their future.
“The bottom line is it needs to be customer-friendly and be used as a way to bring clients on that journey of understanding and education.”
Centrepoint Alliance general counsel Marty Carne further added to Mr Kloufetos’ comments by suggesting the SOA is like a letter of advice setting out to the client their situation and options.
“The way I've always thought of it is that, from a lawyer's perspective, I would write a letter of advice, which scopes out the instructions, describes the issues, provides the options and then makes a recommendation or provides the advice,” Mr Carne said.
“It's really no different that this is not a form that's just called a statement of advice for regulatory purposes. This is your letter of advice that you're making very crucial recommendations to the client. If we all understood that and grasped that a little bit better, I think we'd have better outcomes for the adviser and the client.”
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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