Licensees not an impediment to removing SOAs

Speaking on a recent episode of the ifa podcast, Lifespan Financial Planning chief executive Eugene Ardino said that following the government’s announcement that SOAs would be replaced by something more fit for purpose, licensees should not stand in the way.

“I think industry, government, and regulatory bodies all agree that SOAs in their current form aren’t fit for purpose as a disclosure document,” Mr Ardino said.

“They act as an OK mechanism for getting the summary of the advice from an auditing point of view. Obviously, they don’t give you the full picture, but as a disclosure document for a consumer to make an informed decision, I don’t think that’d be fit for purpose.

“As to some people’s concern that licensees will enforce having to do it an SOA anyway, that doesn’t make sense to me. I mean ultimately, licensees do run a risk-management type business, but utilising a document that’s no longer needed that we all sort of agree isn’t fit for purposes of disclosure tool. It doesn’t make any sense.”

While Mr Ardino agrees with the removal of SOAs, he questioned what form the replacement record of advice will look like.

“That’s the important part. What will ultimately happen, licensees won’t say to their advisers, ‘You’ve got to keep a record of advice that’s legislated. And on top of that, you’ve got to create a whole new document that you need to give the clients to satisfy our risk management’,” he said.

“I would suggest that unless all licensees did that, and I’d say that that would not happen, those licensees who take that approach are going to struggle to keep their advisers because essentially the market decides what’s reasonable and what’s not.

“What will probably happen in my view is once we know what government and the regulators expect to see in that record of advice, that may become a disclosure tool for circumstances where advice is disclosed.

“Unless it’s a very simple piece of advice, I would expect that most advice will be provided in writing. It may not be provided right at the start, but it will be provided in writing because there’s so many things to consider.”

Mr Ardino added that once the design of the advice records is finalised and understood, it might be able to be moulded into something that can double as a disclosure.

“Because a record of advice has to be given to a client, if they ask for it. So, it needs to be in a format that is usable,” he said.

“We currently use records of advice for advice that doesn’t need an SOA. And licensees and ASIC have come out with guidance as to when you should give it to clients and when you perhaps don’t.

“I expect the framework [to be] very similar to that. The different licensees and different advisers will have different levels of tolerance around what they’re comfortable verbally and what they have in writing.”

Once that is clear, Mr Ardino said, it’s just a question of making those documents as concise and fit for purpose as possible.

“I’ve always maintained that it doesn’t matter what’s in an SOA. It’s not going to protect you if your advice is poor. Nothing will protect you if your advice is poor,” he said.

To hear more from Eugene Ardino, tune in here.