What really needs to be in an SOA?

Compliance is widely considered a burden among the advice profession, particularly when it comes to statements of advice (SOAs), with the primary concern being that it takes up too much time and overinflates the advice document.

However, speaking at the FAAA Congress in Brisbane last month, Alexis Compliance and Risk Solutions director Christina Kalantzis said she views it in a different light, arguing that “compliance is not a burden, compliance is protection”.

While SOAs are currently in a period of limbo following an update from Financial Services Minister Stephen Jones last week confirming that advisers will see changes to the advice document with tranche two of the Delivering Better Financial Outcomes (DBFO) reforms, there is still no expected date for advisers to actually see these changes implemented.

As such, the issue of lengthy SOAs will persist for the foreseeable future.

However, while many advisers would love to see SOAs shortened or done away with completely, Kalantzis said that she doesn’t agree with the ‘less is more’ philosophy: “What I agree with is this: tailoring and customisation.”

When it comes to creating an SOA, compliance is no doubt top of mind for advisers, though Kalantzis argued that it is easier than it seems to deliver compliant advice.

“So, what does compliant advice look like? Very simple. I'll give you the answer. Focus on the client. The only thing I'm interested in. You can give me a client file, if we're just focusing on the client, I don't have an issue with that,” she said.

“If we have a client focus, and everything we did in terms of the advice is with a client focus, client-centric model, you've got compliant advice.”

When it comes to the expectations of ASIC and AFCA, she argued that what they want is sound advice, as such she said advisers just need to make sure they have a “reasonable basis for the advice” and can prove it with clients’ file notes.

Looking from a client and licensee point of view, Kalantzis said that meeting their expectations is also rather simple, though advisers are unnecessarily doubling up on information in the SOA, exacerbating the issue of a bloated advice document.

“Clients want good advice, so do licensees, and they also want to minimise risks. And this is where I think the issues around compliance came around. Over-burdening certain things,” she said.

“We would see examples … where there will be five sections where you summarise what the advice is in an SOA, and we can cut that down into one visual.”

“So what we did, we safely removed things. It's not about us just looking at the SOA that was 93 pages and just going nuts all over it. We looked at what the requirements were, right? Removing repetition is a big one for me,” she added.

Also speaking on the panel, Kinetic Compliance director Nadia Docker explained that there are, of course, key areas that advisers still need to include in their SOAs, while others are somewhat redundant.

“The main thing is covering the best interests, appropriateness and clients interests are your big three. And then we know there's those additional disclosure requirements around product replacement as well,” Docker said.

“And we know that there's key disclosures and information that ASIC would like to see in your SOAs.”

However, Docker explained that some sections of the SOA, such as the appendices, are for the most part skim-read at best. As such, she said that “they don’t need to be in there”.

Despite clear opportunities to reduce the administrative burden of SOAs, it is important to note that many advisers are stuck with lengthy advice documents due to the requirements set out by their licensee.

On the other hand, financial adviser Dr Ben Neilson has argued in the past that advisers can also take the initiative to suggest changes to their licensee, rather than simply accepting the standards as they are.