SOAs and NCAs: Opportunities for advisers in regulatory reform

When it comes to the second tranche of Delivering Better Financial Outcomes (DBFO) reforms, statements of advice (SOA) and the proposed new class of advisers (NCA) are chief among the concerns of financial advisers, though an accurate timeline for delivery on these reforms is yet to be seen.

Despite this, Forte Asset Solutions founder and director Steve Prendeville said on The ifa Show that some advice firms have already begun preparing for change.

“I think that most business owners have already considered it. They already know that the core principle of this is ‘make it easier to understand’. And so, let’s cut the 50 pages of legalese and concentrate on the five pages which is concentrated advice,” Prendeville said.

One way in which firms are adapting is through the use of technology and video SOAs to reimagine how they deliver advice, though fear of industry regulators, which ultimately led to the current, bloated form of SOAs, continues to impact the profession.

“I think that technology is probably a huge elevator. Yes, legislation has been an inhibitor but we’ve also got other initiatives like AI, which is assisting in back office productivity,” Prendeville said.

“And if we can get it, that will hopefully reduce the legal risks that are associated with the provision of advice, [and] we’ll have a clearer understanding.

“We’ve got a lot of grey there and business owners are terrified by the prospect that they could have something that exposes them. And that’s what’s created the SOA, sort of 55-page document that no one reads or is interested in.”

However, Prendeville said, the nature of the Australian Securities and Investments Commission (ASIC) has somewhat dampened the profession’s ability to utilise technology to its full potential.

“We’ve still got ASIC there that is aggressive,” he said.

“I recently attended a conference in New Zealand and they’re very [interested in] working with [advisers] – ‘How can we help you?’ It’s a completely different environment from their regulator to ours and so there’s a different risk profile that’s created by the regulator.

“So, that has stymied growth and at a time where, and will continue to be, where more and more Australians need [advice] and we’re seeing the costs going up so many Australians can’t get access to it.”

What about NCAs?

There has been no shortage of worry among the advice profession ever since the government announced its intention to introduce NCAs or “qualified advisers” as they were initially called, back in December 2023.

The government has since received heavy criticism, particularly in regard to the initial naming of NCAs and the inability to charge for their services, which ultimately made them an unviable prospect for advice businesses, though both issues have since been rectified to a degree.

Now more than a year on from the announcement, Prendeville said that NCAs provide a much-needed opportunity to address both the insufficient inflow of new talent to the profession and the lack of current ability to service clients with less complex needs at a more affordable price point.

“I don’t think it’s a threat, firstly. I actually think super funds are the way to provide general advice and that’s all we’re talking about is general advice to members. And so I think that that is a big step forward of serving people that actually require advice,” he said.

“The other part is, I think it’s a great incubator for talent and this is one of the things that we’re really sort of struggling with. This is one of the impediments to growth – is actually the absence of talent – and so I think that we need it.

“The banks used to be our incubators of the talent pool. They paid more, they educated extremely well, they got grads in and by the time that they had got three years to five years’ experience, they understood that, oh maybe independence is the way to go rather than institutional.”

He added: “To me, it’s non-competitive.”

Although NCAs pose a unique opportunity for the profession, some have raised the concern that they could stray outside their designated scope of advice, though Prendeville thinks this an unlikely occurrence.

“They have real rail tracks of what you can do and this is your script that you stay within and they don’t come out outside of that or if they do, they’re immediately brought in ... because all providers are extremely aware of legislative risk and so no, I don’t harbour that,” he said.

“What I’ve seen, and particularly with general advice, is just the additional use of technology as well. And that, I think, is going to be one of their growth areas that is quite exciting as to being able to service middle Australia. So, I’ve got no concerns.”

To hear more from Steve Prendeville, tune in here.