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.”
Fix what we have – yes please. I have a client that said this: We have a relationship that has been in place for years. Your SoA documents whilst I understand you have to do them, read like we don’t trust each other. eg: I am well aware that I am responsible for my own decisions – why it has to be stated in an SoA, the client is unsure! I personalise where I can anyway but its the rest of the have to put in things that clients just don’t like reading.
Here’s an idea ASIC, ask the clients what they want. Stop listening to lawyers who are more interested in padding out their fees building 70 plus page documents that no one wants.
Its ridiculous to even consider another document. Fix the SOA to be consumer friendly. Have a corporate brochure covering the compliance and disclaimers where you can.
The SOA should always have a executive summary and this incorporates what the article says could be another document. We are only human. We dont need 10 documents for something thats not that complex.
[quote=Anonymous]How about all we give the client is a letter of advice, and we do away with the SOA, but keep all our research & notes on file to be able to justify the Letter of Advice. [/quote][quote=Anonymous]How about all we give the client is a letter of advice, and we do away with the SOA, but keep all our research & notes on file to be able to justify the Letter of Advice. [/quote]I I have always pushed that idea. But the ASIC lawyers believe advisers cannot do file notes & Strategy Papers. Fancy a heart attack – watch the Macquarie webinar on SOAs post Hayne
Or get a meeting with potential clients , advisers and ASIC in a room to discuss a sensible document …… Sorry Asic won’t participate . where is the new Bloke … having scones and tea with the new financial services minister ??
Commonsense is not that common, wish it was and that it happens.
How about all we give the client is a letter of advice, and we do away with the SOA, but keep all our research & notes on file to be able to justify the Letter of Advice.
Clients do not read 30 plus pages of SOA. Simples !!! ASIC are currently tossing in SOA hand grenades at AFSLs and closing the door. The most recent ASIC sample risk SOA was a joke. Yet ASIC said its consultant behavioural scientists believed it was “effective communication”. When I was self-licenced I had a flowing yet compliant SOA. Ten years later and todays risk SOA has no flow, repeats information and has a jarring pattern. All those caveats & un-necessary “disclosures”! Our risk SOAs are worse than the indecipherable software agreements no one reads.
sounds very reasonable. Good points raised by Nikolas.
” Demonstrate to the client that the advice is worth the cost “.
Whilst the client will quite obviously determine whether the advice is worth the cost by either agreeing or not agreeing to pay the fee, to demonstrate or describe within the document how the advice cost is an equitable outlay for the depth of advice provided could well be very subjective in what some clients determine to be valuable to them.
I understand the context of what is being suggested, but it could potentially create an issue.
and yet again no one is listening to the clients themselves…if you asked them, they want 2 things, simplicity of comparisons/strategy and recommendations and speed and simplicity of implementation…and we’ve never been further away from both. Oh and thanks to lawyers and compliance people deciding “what they think would work well” instead of Advisers or heaven forbid someone with a marketing background, we have exactly the shamozle we have now!! Lets be clear – advice needs to be sold to people, just like IPads did, yet Apple didn’t let their compliance team design the fricken thing did they!!!!??
Some sensible, dare I say common-sense, points in this article. I can’t say that I’m a fan of an additional letter to the client setting out the scope and options available to the client. Those issues are easily incorporated in the SoA. The additional covering letter is doing the opposite of making the advice documents more client-friendly, in my humble opinion.
Not at all the first person to have said this but who is going to provide the industry with a client friendly, legally sound, example? no one. not even the regulator has done this as it omits so much and not one consultant has gone on a limb for the industry by doing so. Given the subjectiveness of the safe harbour provisions, where all left wanting to have better SoAs but forced to hand over 80 page monsters to clients. Easy comments to make from grandstand by Nick but where’s the help and guidance for those on the field?
OMG, typical lawyer, supplement a SOA with a letter of advice. You are serious. This is the problem with compliance, lawyers get involved and all common sense goes out the window. How is anyone supposed to produce a SOA which is “client friendly” which all and sundry needs to be disclosed. I thought the SOA was the letter of advice. Imagine if you applied the financial services SOA logic to the medical profession. My son had a motor bike accident. Had a huge gash taken out of his leg. What do you want the doctor to do – stop the bleeding, sew it back together and bandage it up – i.e solve the problem. In a financial services context he’d have to prepare a fact find, my son would sign it, he’d then put in writing what he was going to do, offer some alternatives remedies, get signed approval before solving the problem – meanwhile my son bled to death….
We already offer the client an advice in a nutshell page with the soa, the SOA also already shows all costs, projections and so forth. This whole article was a waste of 5 minutes, please tell us something we don’t already know instead of rehashing all this stuff and bringing on these people to tell us how to suck eggs to try and stay relevant. It is just a waste of good internet space.