Assured Support principal Sean Graham said the law only stipulates that eight elements be included in an SOA document, and a lot of information included in modern SOAs can be cut without compromising the document’s compliance.
“I think that RG90, for all its limitations, is actually telling us we can cut stuff out of our SOA,” he said at the ifa Business Strategy Day in Sydney this week.
“Your advice has to be clear, concise and effective, and how can 60, 90 or 120 pages be clear, concise and effective?” he said.
“At the end of the day, when the issue is addressed, it’s going to come down to: did the client understand what they were getting? And if the document is 120 pages, is it reasonable to expect the client would understand the advice’s implications, consequences and what it meant?”
This applies to SMSF professionals in particular, who often offer complex advice to clients with substantial wealth.
Verante Financial Planning director Liam Shorte said the focus of SOAs should be on best interests duty, not liability protection through disclosures and disclaimers.
“If we accept that all our work should have a focus on the client’s best interest then this should make it simpler to produce SOAs that are client focused, understandable both in words and flow charts to suit differing preferences and concise enough that SMSF trustees actually read the document,” Mr Shorte told SMSF Adviser.
“I just have to agree: we must work with compliance experts and ASIC to stop the production of 60-100 page SOAs that turn off clients,” he said.
“I tell clients that if I cannot explain an investment in one minute to them then I will not use that investment in their portfolios, yet I then put a 60-page SOA in front of them to meet compliance requirements. There has got to be a better way,” he said.
katarina.taurian@momentummedia.com.au
I presume you spotted the Appendix of RG90? It shows an example SOA (‘template’) from ASIC.
http://download.asic.gov.au/media/1239911/rg90-published-20-august-2013.pdf
ASIC managed “only” 23 pages for simple insurance recommendations. They reduced it by having information external to the SOA, not by actually “cutting stuff out” which the client would need to know.
This debate has been ongoing from the moment I entered the industry. Statements of Advice will never be concise – they can’t be. The subject matter is complex and as much as we all might despise it, the document serves a number of purposes including informing the client, and covering our backsides. Every word in every SOA represents an opportunity for someone to sue me. If it was possible for them to be clear, concise and effective, they already would be. So would every Product Disclosure Statement. Is your home and contents insurance PDS clear, concise and effective? And when did any of us last read ours word for word?
It is a total disgrace and ASIC as well as mealy mouthed spineless licensees that over compensate to cover their own arses are responsible. It is an indictment on the regulators that it has come to this. Of course, these idiots have never run a business so what would they know about client communication and efficiency of business practice.
I’ve never understood why ASIC don’t have a template. RG90 outlines the components required. Why not go the extra step and provide the shell document? The ATO can provide a tax return form for completion. I understand there are more variables and that the scope is broader, but if there are minimum components require in all advice then a template should be doable. This would produce a more consistent outcome, it would make advise more comparable if someone gets a “second opinion” and it may help reduce some of the cost associated with preparing much larger documents.