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The Problem With Statements Of Advice

Editorial General 04 Oct 2017

 Opinion Piece By Hayley Knight

Recently I heard SOA’s described as a “necessary evil”. A document that is only provided to satisfy compliance and usually gets dropped into basket of unopened mail, used envelopes and documents that will eventually be filed when the client gets home.

I have started to question who this document is actually meant to benefit. Seriously, if the Adviser only sees it as a compliance obligation and the client only glances at the fee page and falls asleep when they attempt to read the advice, why are we even providing an SOA? In whose best interest are we acting?

I have seen thousands of advice documents, from a wide range of dealer groups and boutique licensees and there is one common theme, the longer the SOA the less transparent it is.

If it takes any more than 20 pages to explain the advice and products, disclose the fees, detail the implications of proceeding vs not and to demonstrate that you know the client then you are doing it wrong.

That document should be seen as prime real estate. Every single sentence, chart and table needs to be questioned. Does this really need to be here? Pages upon pages of jargon, repeated disclosure and boring generic graphs clutter the actual advice and provide no value to the client.

This begs the question, why are we seeing SOA’s 40-50 pages long? This may be polarising but I think needs to be said; these SOA’s are in the Licensees best interest. The focus is on ‘covering their butts’ as opposed to having more focus on the actual advice itself and unfortunately it’s the major players that are the worst culprits. Why do we need to crowd the advice with useless info when the strategy itself should be strong enough to stand on its own?

Don’t get me wrong, I’m not saying that reps of the major licensees are dodgy, my point is that their SOA’s have been designed as a form of blanket protection to give them the best chance of covering all bases, in case the Adviser hasn’t. But the end result is a document that is too long, ridiculously complicated to put together and something even qualified Paraplanners struggle to comprehend. So what chance does the client have?

Let’s be clear, the whole point of an SOA is to make sure the client is absolutely crystal clear on the advice and 50 pages does nothing but create confusion and potentially leaves the adviser open to litigation more than if it was written in line within ASIC guidelines of being simple and concise.

This is not good enough. For years Advisers have been complaining to their Dealer Groups about these arduous documents with their frustrations falling on deaf ears.  It’s high time the voice of the Adviser starts to be heard and with the value provided by the dealer group falling into question in future, they will have no option but to adapt or die.

There are so many amazing Advisers out there trying the ‘clean up’ the reputation of Financial Services and although the SOA is only a small cog in the wheel, it is long overdue for an overhaul. Let’s cut the crap and pay more attention to the quality of the advice to resurrect Financial Services and overcome another hurdle in the advice process to make sure more Australian’s have access to the advice they need.

Hayley Knight is the Director of Contract Paraplanning Services (CPS). CPS was established in 2010 and is a contract para-planning service helping advisers around Australia. The views expressed in this article are her own.

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14 comments

"Dover's SOAs are typically between 5 and 7 pages long and, excluding thinking time, take less than 30 minutes to prepare. Clients love them, because they understand them. "

Terry McMastet 21:18 on 08 Oct 17

"I could not agree more! Perfectly told! Recently I completed two 82 page SOA's for an SMSF deal...."

Liam Harrison 17:06 on 05 Oct 17

"What a great site. I am from California. I believe your SOA is like our financial action plan. We now use Learnvest for our plans - see attached example. https://www.learnvest.com/wp-content/uploads/2015/03/LearnVest-Action-Plan-Sample-One-Program.pdf Rather simple but passes our regulator's approval. I had the same issue in finding the right platform that helps both me and my clients. "

John Rhodes CFP 10:26 on 05 Oct 17

"After 30 years in the business, I have never seen so much useless (to the client) information that we are obliged to include in a SoA and RoA since I produced the 60 page document when completing the assignment to obtain my CFP designation. Spending three days on an annual review (ooooops, not allowed to call it that), to produce a 30 page document that the client falls asleep on after 10 minutes of reading, I do not believe is in the best interest of the client. My experience, once the client loses interest in the document - they do nothing! My clients employ me to 'advise' them on the best course of action based on my knowledge and experience, and after doing all my research. If we are expected to take 27 pages to advise just on insurance, how long a document when we have to advise on investments, and all alternatives, all aspects of Super, all aspects of insurance (the insurers take up to 100 pages alone in their PDS's), and the list goes on. Keep it simple, concise, and to the point - this would be in the best interest of the client. Try to cover every possible contingency - only try's to protect the Adviser."

Brian 08:44 on 05 Oct 17

"I totally agree. I understand that the licensee needs to take appropriate steps to cover themselves, however, I think it often leaves the client without a simple reference point for what their advice is. There is a lot to get through when presenting advice to clients and it's hard for them to take in so much in during one meeting. The average SOA might be fine for the financially literate clients, but I think it's letting down those with less of a basic knowledge (financially), and it's those people who would need an SOA most."

Monique 07:10 on 05 Oct 17

"While ASIC "say" they want shorter clearer advice documents for clients, the guidelines they produce actually tell us to include more and more information. Anyone who has read RG.175, ASIC Report 413, and ASIC Report 335 know ASIC is joking when they say you should be providing shorter SoA's. To cover everything they say, is easily a 20 to 30 pages, and anyone doing it in 10 is probably non-compliant."

Ryan 22:19 on 04 Oct 17

"Right to the point. Clients do not read or comprehend them because they are so long and designed to comply with the law and protect the Dealer Group, not provide crucial information for the client. Some of the more progressive Dealer groups however have been able to reduce SOA's to under 10 pages by using hyperlinks, not duplicating information already in the PDS and not putting in numerous disclaimers,etc "

Chris F 15:46 on 04 Oct 17

"As a professional financial planner with more than three decades in self employed practice, I have always preferred to write my own SOAs because I can write a better plan than a paraplanner. I agree that well written plans should be succinct without the padding. However, because of compliance issues, licencees must cover their bases having to jump many of ASIC's hoops. I am a little concerned about the author's remarks regarding the so called ' amazing advisers' trying to clean up 'the reputation of financial services'. There are a handful of advisers that tarnish their own reputations whilst the majority can hold their heads high. Media loves to consistently bash the industry but everybody in the financial planning fraternity I have been associated with have the highest integrity. Strange that these comments come from a paraplanner. I have never heard of an SOA as being a' necessary evil' as they are well structured documents that provide a consolidated report recommending workable strategies. "

Anton Boreckyi MFP CFP DFP 14:54 on 04 Oct 17

"any even then, SOA's are protection enough if goes to court, so then become useless. agree to making them clear and consise. remember the 10 page FPA version that was going to come out years ago."

Chris 14:43 on 04 Oct 17

"Yes we know this - but what are we going to do about it?"

Liz 14:38 on 04 Oct 17

"ASIC's example SoA is 40 pages and this only covers 'scaled' advice! Perhaps if the regulator provided a clearer framework to act on the dream of a concise SoA's can become a reality"

John 14:37 on 04 Oct 17

"Suffer, customers, suffer. ASIC has insisted on the compliance requirements and you will pay the price. Just wait for the carnage when the under-insurance time-bomb explodes due to a lack of decent advisers who know how to present. "

Michael 14:34 on 04 Oct 17

"Totally agree. However I suggest the same comment could be applied to much of the reregulation of the financial services industry as everything is more complicated but less and less transparent without presenting improved outcomes. Even the Government's conclusion that the public has incorrectly seen super as a wealth creation and tax planning strategy for the past 25 years is a move that requires deep consideration as to what the Government's true motivation is as they make it more and more difficult to deliver service to the public. "

Harry Burke 14:34 on 04 Oct 17

"Seriously, it took you this long to work out SOA's only cover the butt's of the licensees? "

Chris 14:31 on 04 Oct 17

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