As part of the government’s response to the Quality of Advice Review (QAR), Financial Services Minister Stephen Jones announced that “the lengthy and legalistic” statements of advice (SOAs) will be replaced with a financial advice record for consumers that is more fit for purpose.
Padua Solutions co-founder and co-chief executive Matthew Esler said removing lengthy SOA documents does not mean that advisers no longer need to produce a financial plan and regularly review that plan.
“Much of the industry were wrongly suggesting the removal of the SOA or ROA meant you weren’t required to produce the financial plan or review,” Mr Esler said.
“They have now realised that getting rid of an SOA doesn’t mean that you’re getting rid of the financial plan or you’re getting rid of the review. We are moving away from the safe harbour steps but we are still going to have best interest, and we’re now also going to have the good advice requirement.”
Although new documents are expected to be less prescriptive, Mr Esler said advisers should show clients how the technical strategies they suggested are creating value.
“If you look at how much time it takes to produce advice at the moment, I don’t think a lot of that time is going to disappear by getting rid of the SOA document,” he said.
“When a client meets with a financial planner, they are going to expect a financial plan. You are going to need to highlight their existing situation, the benefits of the recommendations, the cost of that advice, and the value your plan will create.
“As fiduciaries, it’s really important to highlight to the client what their existing situation looks like and where they are headed. Then, based on the recommendation, this is how much closer they will be towards achieving those goals.”
Mr Esler said financial advice technology solutions have a key part to play in helping advisers demonstrate that value but added that he is concerned that because of the pressures faced by the shrinking number of financial advisers in Australia, they have not been able to provide the best technical strategies to clients.
“The technical strategies we employed in the early 2000s were far broader than the technical strategies being employed today,” he said.
“That means that advisers are potentially leaving benefits – concessions, rebates, deductions, offsets, and the like – off the table, which means the benefit that’s being afforded to the client has been lowered.”
High-quality technical strategy creates tax and other benefits for clients that are “certain” over and above the uncertain returns through investments, Mr Esler said.
“Being able to show what the maximum quantifiable benefit of each strategy is incredibly powerful, and something that has never existed in the industry, but with advancements in tech, it’s something that is going to exist in the industry in the near future,” he said.
I’d agree that back in the early 2000’s we had greater complexity..Advice has become far simpler but SOA’s are now written better, more tailored, the size of the SoA has reflected Government intervention, the AMP Super switching scandals, and the 10-11 regulatory bodies and a booming compliance industry. I can’t see how a SoA will disappear but I can see it being replaced by a Statement of Evidence (SoE) being a document with about 5 pages less.
SOA’s aside, the thing that is holding the industry back is charging clients a percentage based fee for whatever they have invested. The industry talks about being treated the same as lawyers, doctors, accountants, etc, but want to remain with the same out dated charging process.
Whilever the bulk of the advisers in the industry are employed by product manufacturerrs, the Government will see us as salepeople and will continue to bury us in red tape.
The solution is to radically reduce the red tape for independent advisers that charge on a fee for service basis. This will encourage more to move to the way advice should be delivered.
the future after QAR will render these solutions obsolete, ‘review a plan’ doesn’t mean anything to the client. the future is the individual modelling software, risk analysis etc. that you update on occasion but the VALUE as always is the adviser, anyone who thinks using a word document as a source of truth and review is blind to what the client actually values. Sharp, visual, simple tech is the future and will make our lives easier and cheaper, the paraplanning and holistic software juggernaut is over
Let’s hope you’re a phophet!
I thought the same thing 20 years ago…people never wanted a SoA in the first place….Consumers under 30 years of age can’t sit through an Oppenheimer movie they just want to see the explosion emoji in less than 10 seconds on Tik Tok. But until we get rid of 10 Government bodies that control advisers it’s never going to happen. Eventually, we will hand consumers (via a video) a QR Code with a link to a 50 page document but we’ll still be doing the 50 plus page document.
Conflicted rot, and frankly disappointing. No accountants, lawyers or brokers provide 70 plus pg documents. Stop crippling advisers with red tape and funding the ignorant and fat tech and bloated compliance economy.
But your honour….I was told I didn’t have to do an SOA anymore…
Silly comment. Most components of the Soa are replicated from the advice process in fact finding research file notes and modelling. Repeating it in an afsl compliant 80+ pg form is a waste of everyone’s time. Except for the bloated compliance economy getting fat off vetting plans most don’t understand or couldn’t successfully advise on themsleves.
The original 1 page Customer Advice Record, which summarised the advice/recommendation & cost was fine. Then the accountants/ASIC took over, & padded it out, in order to justify their high review fees.
“”You still need an advice document” says the head of a company making money from producing advice documents.
Matthew, when you go to a doctor, do you just accept their word when they say this medication will lower your cholestrol, or do you ask for alternatives, get future medication cost projections, etc. No, you spend 5 minutes talking it through and get a script.
Now advisers will still need to have a broad plan for clients to follow, but it doesn’t need to be documented like it is now. It might be (and should be) a one-pager. The biggest obstacle to this will be continually having financial advisers aligned to product providers.
I agree with comment below. Interesting how these tech industries that fed off our overbearing compliance system are starting to show concern. might be time for them to move on to another industry 🙂 .. advisers have been putting up with this extreme red tape and associated costs for too long.. all we need now is a good look at how we can improve how relevant providers are authorised .. the AFSL model is no longer needed for advice providers and far too costly.. if they want to lower costs look there.. thats 15 – 20 % of peoples income in some cases for essentially PI insurance and a remuneration service and yearly audit by some in competent ex school teacher who has never worked a day as an adviser … I thought that issue would have been first cab off the rank even before SOAs but anyway hope springs eternal.
Imagine if they removed the current model with licensee, SoA’s, FDS’s etc We’d all be able to do what we are supposed to do, focus on proving advice that helps clients improve their financial future and less time on the crap holding us back. I’m not saying we don’t need strict regulations as what we do is a serious business but not the way it is. I’ve never thought about leaving more than I do currently. Will see how this evolves.
Agreed about the AFSL regime. Qualified advisers should not have to be under this. Unqualified, conflicted, call centre workers should be under the AFSL regime as a means of monitoring their “good advice”.
10000000% All the big AFSLs get second hand info anyways. They have bone heads as compliance managers reading the rules and because they have no experience in advice their interpretation is warped.
I have always had the mindset I will still provide an advice document to clients, just a MUCH shorter version. I am hoping I can then fairly quickly produce this advice document myself. Currently I complete all the strategy work which as we know is a big task to do it properly and then take the time to complete an SoA request form. Then wait a week plus for paraplanning to complete the document, review the document (reading 60+ pages takes time), send back for amendments or clarification, pay the bill and then provide to the client. I would be able to provide advice faster, simpler and at a lower cost. Not sure how paraplanners will come out of this and feel for them if many are out of jobs but the current system is a clusterf%$k in my opinion. This would be a game changer for my business.
Who is the paraplanner you’re working with? I am myself a paraplanner and in less than 2 days i create the strategies and SOA. Completing an SOA is not that long everything is templated already. The timing won’t change much because you still need an SOA like document on file. I don’t think the industry will go from one extreme to the other.
The difference will be that I won’t need to send off the request to a paraplanner, I’ll be able to do it myself. Most of the work is the strategies but then to put together an SoA that meets the licensee’s requirements is time consuming, hence outsourcing. I’d love to be able to just do my strategy research then add it into a simple document just a few pages long. And also, you may be able to do it in 2 days but I have not found a paraplanning service that can get an SoA back to me in less than 5 days.
[i]“The technical strategies we employed in the early 2000s were far broader than the technical strategies being employed today,” he said.[/i]
Are you still a working Real Adviser ? = NO
Your statement is pure waffle and rubbish.
Seems all you are interested in is protecting your software to continue to produce SoA waffle that no one cares for, not even ASIC anymore.