Best interest: What to include in your SOA

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Amidst regulatory guidance for platforms in RG148, financial services lawyers have discovered a warning to advisers who use platforms.

“It outlines significant precautions advisers must take when selecting and recommending a platform,” said Claire Wivell Plater, managing director of The Fold Legal.

She says that the best interest duty not only applies to investment recommendations, but also to recommendations on what platform to use. Advisers’ SOAs therefore need to include the range of implications a platform may have on a client.

There are a few key things that Wivell Plater says SOAs will need to explain:

  • Why investment through the recommended platform will benefit the client, rather than investing directly or through another platform
  • Why the features and services of the recommended platform are suitable for the client
  • The investments available, how they are selected by the platform operator and why they are suitable for the client
  • The fees and costs associated with the platform and how they relate to the costs of the underlying investments and advisers fees
  • Any significant tax implications arising from use of the platform
  • What will happen if the client wants (or has) to leave the platform if they opt-out of receiving ongoing advice

She says the client should have enough information to assess whether to use (or switch) to a platform. When justifying the selection of a platform, advisers need to look at:

  • Does it have an investment committee and are there any independent members
  • How does it select investments on its menu
  • To what extent is the investment menu limited to products issued by the platform operator or its affiliates
  • How will the operator deal with clients who don’t “opt in” to ongoing advice.

“You’ll need to tell clients about how you selected the platform – just giving them the IDPS Guide is not enough.”

Wivell Plater says that in addition to fees, the SoA should explain the total costs of the platform and underlying investments, but doesn’t need to set out all the costs of the platform and investments, as these are detailed in the relevant IDPS Guide and PDSs.

Do you already include this in your SOA, and do you think it's necessary? Share your thoughts below.

  • Innocent Observer on 9/09/2013 5:05:47 PM

    And in other news, scientists say the earth isn't flat.

    C'mon WP. Let her market her wares by all means, but hopefully with something more than regurgitating compliance 101. Find me a practicing adviser who doesn't know this stuff.

  • Warren on 9/09/2013 2:47:48 PM

    This is a great example of over kill.
    Is it any wonder the honest experienced advisers are either leaving the industry or giving in to the Institutions back room boys providing all this stuff which is to protect the Institution and generally has no bearing on client protection or advice.

  • Pat on 9/09/2013 11:11:26 AM

    How is what this lawyer saying any different to the broader best interests provisions, safe harbour steps and other matters? I am guessing it is a lawyer trying to get her name in the press for marketing purposes.

  • GAB on 9/09/2013 10:18:20 AM

    This is exactly the rubbish that needs to be looked at and removed from the advice component. Providing the advice matches the client objective, the fees are disclosed and agree upon....then why oh why must we bang on about why we didn't recommended this or that and further confuse the issue.

    Advisers offer diverse opinions and use a diverse range of tools. If the advice looks to meet the client objectives and the investment strategy is well diversified and the risks explained....that is all that is required.

WP forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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