Dealer groups to keep SOAs despite QAR recommendation

Former financial planner and Asendium chief executive Scott Miller says there are two schools of thought about statements of advice (SOAs) among advisers.

“One is that the SOA is the value delivered. The other is that it is a barrier to the advice delivered,” Mr Miller told ifa.

“Planners who see SOAs as a barrier will welcome the recommendation to get rid of them. Those who see SOAs as a value will see the recommendation as an opportunity to provide advice using a more engaging, less legalistic document,” he said.

However, when it comes to licensees who authorise financial advisers, Mr Miller believes it is a very different story.

“Licensees are not doing away with SOAs,” he said. “Every licensee that I have spoken to, from the largest dealer groups to the smallest AFSLs, have said they are keeping SOAs. Even if the Quality of Advice Review does away with them, licensees are still of the belief that they should be stored on file.”

Under recommendation nine of the Quality of Advice Review final report, Michelle Levy stated that the requirement to provide a statement of advice (or record of advice) should be replaced with the requirement for providers of personal advice to retail clients to maintain complete records of the advice provided and to provide written advice on request by the client.

However, little information has been provided about what these records might look like.

“An adequate record right now in the eyes of the planner, the licensee, and the regulator is an SOA, which is a collation of the fact find, research and recommendations in one document,” Mr Miller said.

“Licensees will still insist that their planners create an SOA to keep on file. But you might also see the engagement with the client via a video SOA or a PowerPoint or a letter summarising the advice, which will be more welcomed by the consumer.”

Others have suggested that the loss of SOAs could create issues for advisers looking for professional indemnity (PI) insurance.

If a client experiences financial loss due to following the advice outlined in the SOA, they may seek compensation from the financial planner or adviser who provided the advice. To safeguard against such claims of professional negligence or breach of duty, personal indemnity insurance offers financial protection to the planner or adviser.

GSA Insurance Brokers head of professional and financial lines, Ryan Neary, told ifa that the major concern for insurers in removing or reducing SOAs is that they contribute a significant part of the defence for insurers in the event of a claim.

Namely, SOAs play a significant role in an adviser’s defensive strategy. This is because a well-documented SOA can provide evidence that the adviser provided appropriate advice to their client and can help demonstrate that the adviser fulfilled their duty of care.

“If SOAs were removed in their entirety, insurers would lose a significant element of their defensive strategy on behalf of the adviser, which would cause them concern,” Mr Neary said.