Taking a 'blank canvas approach' to post-DBFO SOAs

In a statement last week, Financial Services Minister Stephen Jones provided further details on the second tranche of the Delivering Better Financial Outcomes (DBFO), including assurances that statements of advice (SOAs) will be reformed “so they help consumers make informed decisions”.

As it's widely understood that SOAs are unnecessarily long, with some arguing that they border on unlawful, and are likely going unread by clients for the most part, the industry has long awaited the chance to change or completely do away with onerous SOAs.

In response to the minister’s announcement, Adviser Ratings said that, after years of advisers dealing with bloated SOAs, “now is a rare opportunity to take a genuinely blank canvas approach to advice documentation”.

With SOAs currently ranging from 80 to 120 pages long, the firm described the existing format of the document as “a relic of the early 2000s when Microsoft Word and paper were the best technologies for documenting advice”.

Now that advisers will have the opportunity to create a more flexible, client-centric advice document, how advice practices choose to go about repackaging the SOA information for clients is the question.

As such, some advisers have begun exploring video SOAs, though the degree to which they are doing so varies between practices.

For example, Martin McGrath, an adviser at Financial Edge Group, told ifa that his practice uses videos as a companion to a more traditional SOA document, utilising videos to explain concepts within the SOA and answering clients’ questions.

Meanwhile, speaking to ifa ahead of the Adviser Innovation Summit 2024, Verse Wealth chief executive Corey Wastle explained how his practice is scrapping the “jargonistic, confusing, and compliance led” SOA, opting instead to utilise a combination of recorded meetings and a 3,500-word summary of advice document.

However, Adviser Ratings argued that leading practices are taking a more personalised approach, “balancing flexibility and control” by catering for the preferences of different client segments and their preferred form of communication.

“While some clients value detailed written analysis, most respond better to visual representations or interactive tools. Removing prescriptive SOA requirements allows practices to cater to these preferences while maintaining necessary compliance standards,” Adviser Ratings said.

Although there is still no estimated date, or even an official draft, for tranche two, the firm is urging advice practices to start planning now. With some practices already implementing alternative options to a standard SOA, Adviser Ratings suggested more start looking at how they can reduce the burden of SOAs now.

When it comes to designing and implementing SOA alternatives, though, the firm said advisers still need to keep compliance top of mind, ensuring they are meeting their obligations while also providing a more digestible SOA for clients.

“Practices that embrace this opportunity to redesign their advice process around client needs while maintaining robust compliance will be best positioned for future growth. The most successful firms will be those that can balance innovation with practicality, creating systems that enhance efficiency and effectiveness,” Adviser Ratings said.