Midwinter has flagged concerns with a key recommendation in the Quality of Advice Review (QAR) proposal paper.
Namely, the QAR proposal paper suggests removing the requirement for statements of advice (SOAs) to allow the profession to provide financial advice in a way that suits their customers.
However, in an emailed statement to ifa, Midwinter CCO, Steve Davidson, argued that customers will still want, and need, to be provided with an artefact.
“Midwinter welcomes the proposal to remove the requirement to provide an SOA and allow advisers to provide advice in the way that best suits their customers,” Mr Davidson said.
“However, we believe consumers will still want, and need, to be provided with an artefact, as a record of their engagement with a financial adviser, with the primary objective being to inform and explain the advice provided and demonstrate its value. It would also record the provision of good advice and lead to a better and more informative experience for consumers,” he explained.
Similarly, the Institute of Managed Account Professionals (IMAP) argued that while there are a “couple of good points to come out of QAR”, the removal of the current SOA requirements is not one of them.
“The current statement of advice requirements needs to be revised but not removed,” IMAP said in its submission.
“We do not believe it would be appropriate for a retail investor not to be provided with written documentation articulating and supporting the recommendations made to them and for it to be incumbent on the investor to request this document,” it continued.
Moreover, the body argued that this would likely “lead to greater risk of poor documentation and a future increased workload for the Australian Financial Complaints Authority”.
The removal of SOA was previously welcomed by the CEO of the SMSF Association, John Maroney, who said: “We have long argued for the need to recognise the professionalism of the sector, cut excessive red tape, and put the consumer front and centre in the advice equation.”
I’ve asked my clients over the last few years what they want from an advice perspective. It’s clear – all they want from me is my advice and what is the bottom line cost. For me best practice would be to have a clear engagement letter signed by the client identifying the subject matter to address, what the cost is and how the advice will be delivered. I can see new advice docs or similar ranging from 2 to 10 pages.
What about all of the FP firms that have made $5k to $7k SoA + Implementation fees part of the business model and then are now at 30% to 60% of their revenue? For years they have been arguing against % Asset Based Fees and telling their clients how bad these are and how they object to using them……. How do they not have egg on their faces???
When I’ve had meetings with my accountant Re tax entity strategy he hasn’t even taken notes let alone a 80 page doc. I’ve been advising for almost 40 yrs , I wish I had a dollar for every client that said “…..don’t worry about the 80 page doc …. Do you really have to go to that trouble I won’t even read it” they think it’s quite crazy when I spend 2.5 stepping through the nightmare of a SOA. Eg documenting alternative strategies then documenting why we didn’t use them, and repeating the same thing 2 or 3 times. No other industry of profession has to do it ……. But I just charge and they have to pay. Even the ridiculous definitions within “significant change”, at times a 60 to 80 doc that says ….. keep everything exactly as is, but they pay for a 60 to 80 page doc that takes hrs to produce , when it could be a few pages …… sorry what part of that 60 pages , many hrs of work that say do nothing , is in the clients best interest
Another vested interest that has missed the point.
Of course clients will want something, but whether that is in the form of a 2 minute video, a few screenshots from software like Midwinter, or a 10 page written document should be left up to the adviser to decide.
No 2 clients digest information in the same way, and yet we currently have to provide everyone with way too much information that hides the important stuff.
lol midwinter are you arguing for the best interests of your client “the planner” who pays you massive fees – looks like your statement here could be just a little conflicted
I’ll guess I’ll have to demand a SoA from my GP, lawyer, dentist, psychologist, mechanic, electrician, plumber and anyone else who provides me with regular advice based on my personal situation, goals and objectives. Oh, nearly forgot a FDS as well. What a circus we have.
No one has read an SOA in 10 years
Only your compliance auditor, oh and I almost forgot, AFCA. Both of whom weren’t in the room when you gave the advice and don’t know the client
This is the perfect reason why QAR should only be taking feedback from those who provide or receive advice. Product providers, lawyers, public servants etc are only interested in their own interests, and care very little about clients or advisers. They want advice to be complicated, that way they keep themselves in a job.
There are a lot of businesses that are going to go broke once financial services laws are rationalized.
Rightfully so, clients would argue.
lol, of course midwinter still want this.
Interesting to see how this pans out, because every dedicated financial planning CRMs main selling point is their ability to create a SOA. Take that away, and maybe FP business’s consider other ‘regular’ and cheaper CRMs that are better CRMs but obviously don’t have the (un-needed) ability to create SOAs and so some research.
Both the adviser and the advised need to have a written or videod record of the advice given/received, even if only to ensure the advice given was heard by the advised in the way the adviser intended. Communication is a very personal and subjective exercise.
The written/videod advice also needs to be given to make sure any future complaints are based on what was actually said, not on what either party thought was said or think they remember what was said. I repeat, communication is a very personal and subjective exercise.
Not required in other professions such as law, accountancy, even mortgage broking. Unnecessary overkill which add to the cost of production.
The Letter of Engagement will serve this purpose.
This is a great idea
What a load of self interested rubbish!
No one is suggesting that provision of advice in writing may not be appropriate but its horses for courses.
When I get advice from an accountant, lawyer or specialist medico they are not required to provide the advice in writing. If its complicated then there may be something in writing (which could be a detailed email) or if I want the advice in writing and request it (and agree to pay for this part of the service) it can be done but generally the professional provides the advice and I decide what I want to do with it. The professional also generally writes up or records a file note which is their record of what was advised.
Lets get real people. Let the professional educated adviser and the client decide what is in the clients best interest and what is necessary in terms of documentation.
The client will rarely if ever know more than the adviser – whether an accountant, lawyer, doctor or financial planner. As professionals we need to ensure that 1. our clients understand the advice enough to make a proper judgement and 2. that we have an appropriate record of what the advice was.
QAR overlaying the code of ethics and education standards is heading in the right direction. Yes it needs to be finessed but lets not let those with self interest (including licencees) get in the road of making it something workable and in the interests of the client first and then those giving the advice (who need to be able to make a decent living without the current stress and impact on our health).
Vested interests here of course. Midwinter’s main business is in providing software primarily aimed at producing SoAs. The fact that they have failed over many years now to advocate on behalf of their Adviser customers for simplified advice models keeps them in work, responding to including more and more instead of less and less in that crazy, 40+ page document that hardly any client will ever read. I think they are in the least informed position to be making statements as to what clients still want!
Nonsense. We bought a book of business many years ago, and while we did reasonable DD, we didn’t realise that the Adviser gave an SoA to each client, each year, as part of their review. We explained that we would be discontinuing the practice, and we do RoA file notes instead.
Every. Single. Client. said words to the effect of “thank goodness for that!”
The artefact could be a digital recording of the meeting…
I understand the sentiment, but I am not sure that will assist. If the advice is good and works, then fine. If the advice is not good, or doesn’t work, or the client didn’t understand it, I don’t think a video is going to help you. I am not in favour of maintaining the SOA, but I just don’t think a video is going to help. I also don’t think my clients will want to be recorded. I wouldn’t if I was in their shoes.
If a client wants an SOA, then great and they can pay for it. If a client doesn’t want one, then great, they won’t have to pay for one. It has to be optional.
They need the old Customer Advice Record (CAR). It is exactly the right solution
Just because the mandatory nature is remove doesn’t mean Advisers can’t exceed the minimum standard and provide a more tailored client centric document or briefer specific format even via video or shared over a portal. This is midwinter putting their interests over Australians and it’s a rubbish position. Levy correctly identified each iteration of SoA guidance historically was taken to the nth degree in protecting licensees or from litigation not helping clients and creating litigious expensive unnecessarily lengthy, process driven. Midwinter should evolve, not anchor the advice profession for their own benefit. Disgraceful.
Midwinter surely have a conflict of interest here!
Agree, however a full removal of a SoA seems too far. Definitely needs a good revision to make it client friendly and easier to produce.
Rubbish, provide one if you want as a value prop, should not be mandated and the current format is disgusting – compare to the global equivalents. Each historical revision has been interpreted as prescription and added to the problems this was outlined by Levy as the rationale in removal and frankly, I think it’s bang on