Video SOAs are on the horizon, but how can advisers implement them?

In June, 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.

And while this news has been mostly welcomed, the government has only accepted reviewer Michelle Levy’s recommendation for the removal of SOAs in principle, meaning further consultation will be undertaken by Treasury to determine the final design of the replacement.

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The prospect of removing SOAs has been met with both excitement and scepticism among financial advisers, with many concerned that nothing much will change practically and that the regulator and licensees will still require a burdensome document even if it isn’t called an SOA.

According to Nathan Fradley, senior adviser at Tribeca Financial, there’s a misconception around exactly what a video SOA, for lack of a better term, will look like.

“I was part of the video SOA program with the FPA, I’ve done some work with a couple of practices in casual meetings, and we are in the piloting stage at the moment of our video SOA project at Tribeca, so I’m fairly far along,” Mr Fradley told ifa.

“I’ve talked to a number of other practices who have come to me and said, ‘Hey, we’re doing video SOAs. What are you guys doing?’ I’m like, you’re not doing video SOAs. You’re just trying to jam a 70-page document or a PowerPoint presentation into a video. That’s not what it is.”

He added that the term “video SOA” is misleading and focuses too much on the video aspect.

“The video part of it is not the key word. The adviser has to ensure the client understands, and that carries over. Instead, we’re going to communicate over video and I’m going to record it,” Mr Fradley said.

“The video part is merely a record of our conversation, or the advice being given, so that if anyone wonders what was said, it’s there. The reason I film it, is that there is so much more to the provision of advice than what is said. Instead of a file note that says ‘client nodded showing understanding’, you can see if they are actually paying attention.”

While many advisers are fearful that ASIC intervention or their professional indemnity insurance or their licensee will hinder any attempts at innovation, Mr Fradley doesn’t believe this is the case.

“I think regulation versus what you do on a day to day, there’s already a massive disconnect. The regulation and the samples are always substantially smaller, the ASIC commentary has been substantially more lenient,” he said.

“I think that the QAR is really a confirmation on the regulatory perspective, but what we can do now is have that in clearer language, so that’s the first thing.

“I don’t think it’s going to change fundamentally how we do advice in the context of all the work that goes into an SOA is still there. You’ve still got to do your research that’s going to show the client would be in a better position. You’ve still got to understand them intrinsically. But the fundamental benefit of this is how we communicate to a client – we communicate on their own terms.”

Crucially, Mr Fradley wants the focus to shift back to the adviser rather than a document that sits in a file and clients never read or understand.

“I think fundamentally, what I’d like to see is a situation where we move away from this idea of the document being the instrument of advice, and the adviser becoming the instrument of advice. So the file in the background is awesome. And then it is delivered to the client in a way that the client wants to receive it,” he said.

Speaking on an ifa live webcast last month, Sarah Abood, chief executive of the Financial Advice Association Australia (FAAA), agreed that there’s no reason the main form of advice has to come from a document.

“I think the first thing to state is yes, it is part of the streamline reforms and something that we’re hoping to get a resolution on fairly quickly,” Ms Abood said.

“But I think one point to make is that it doesn’t have to be a document. We are very clear on that, that that’s consensus across the associations and across the industry, that it doesn’t have to be a written document that’s however many pages long. It could be a recording of a telephone conversation. It could be a recording of a video meeting with a client, for example.”

Ms Abood also agreed that adviser concerns around regulatory action are understandable but misplaced.

“There’s been some concern expressed that perhaps if we take too much out of this document that some will feel unprotected in the event of a future claim or something of that nature,” she said.

“But AFCA, for example, has been very clear that they already considered the file, not just the advised documents.

“So, that I think gives us some comfort. Look, we are certainly keen on this one, that what’s in the Corporations Act should be principles based. It should recognise the professional judgement of the adviser who is in front of the client to make the call on the exact format that the information gets to the client in the length of that document and so on.

“What’s critical is that the client clearly understands what the advice is, why it’s been given, how much it’s going to cost. There are a few key things that we need to ensure that the client understands to give informed consent, but the best person to make that call is the adviser themselves.”

Commenting on the need to redesign SOAs, Adele Martin, founder of My Money Buddy and The Savings Squad podcast, told ifa in June that in reality, SOAs don’t need to be anything more than two-page documents produced in graphic design platform Canva.

“I have this dream that eventually SOAs will be a two-page Canva document that you generate in Canva, that is pretty easy for the client to understand. Lots of pictures. It doesn’t have to be this ridiculous 100-page legal document,” Ms Martin said at the Adviser Innovation Summit hosted recently in Melbourne by ifa.

She suggested that compliance-friendly video SOAs could also be a solution to the ongoing SOA dilemma.

“Or even something that is digital. Video SOAs. I think that, you know, hopefully maybe this time next year, we’re not even talking about the need to have an SOA. Certainly, overseas, they don’t have that complexity. Like if you go to the UK or anything like that, or even the US, they’re not talking documents like this,” Ms Martin said.

“I actually saw some Canva templates that they put together for an SOA. Wouldn’t that be amazing if we could just give them like a two-page Canva template that summarises things rather than this ridiculous document?”