Do you know what goes into an SOA?

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The debate around the length of statements of advice is missing the whole point on the purpose of the document, according to legal consultant for the Fold, Sonia Cruz.

Cruz reviews SOAs and says that auditors aren’t fans of long documents – it means more for them to read – and have always been of the view that SOAs should be concise. But she says the main issue is that advisers aren’t always aware of what needs to go into the document.

“If they’re working on a template, they may just include all the bits and pieces that they’re not sure about and it becomes this huge cumbersome document. I’ve seen things like educational material and certain research material that’s really not required in a statement of advice.”

This could come down to whether advisers have been given sufficient training, says Cruz. She says there is a lot of repetition and generic content. Advisers also include too much legal jargon, warnings, and disclosures that aren’t required to be in the document. Insufficient customisation is also a critical area that adds to the unnecessary length of the SOA.

She says the introduction of incorporation by reference meant that advisers could have information attached as separate documents to refer to if needed. “There was a push to try and condense SOAs but it just seems like advisers haven’t adopted that approach and I’m not sure why, to be honest.” Cruz says they will be releasing a white paper to help clear up the understanding of what needs to be including in an SOA and what is optional.

“A lot of the time clients are very time poor and that’s why they go to see an adviser. They’d want a short concise document that explains ‘this is the advice I’m giving you, this in the implications, and this is how much it’s going to cost. Clients aren’t going to read 60 pages.”

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  • Bec on 23/04/2013 8:16:55 AM

    Imagine we were writing less lengthy SOAs... This article would then be about advisers refusing to meet compliance standards and not being cautious enough. We can't win!

  • Bobby Brown on 22/04/2013 9:47:10 PM

    Most advisers have the ability to verbally sum up very complex issues in an easy to understand terms, for ordinary mums and dads and could write a SoA in under four pages. It's not our fault. Compliance advisers, like the writer and the legal profession are to blame for the complexity of these documents. In the end it causes advisers to either omit statements or say something inappropriate because of the length. My dealer group now requires me to sign off on a ten page best interest checklist, where is this in the legislation. Perhaps we should adopt the accounting profession method and provide no consumer protection documents, other than a letter of engagement and a trust deed

  • Innocent Observer on 22/04/2013 11:27:52 AM

    Spot on BP. The average planner is conservative by nature, hence it should be expected that when in doubt we err on the side of caution. The problem with long SoAs is that clients (unfortunately) rarely read them cover to cover. I don't think this devalues our advice at all, but I do think it presents a cover for poor advice to be dressed up through the complexity of a 30 or 50 page document. (Erring on the side of caution & compliance I only provide Limited Statements of Advice - even if they cover everything but the kitchen sink, by clearly defining what I am covering in my advice and excluding all else is better/lower risk from a compliance perspective and means less of the generic disclaimers clogging up what should be a clear fin. blueprint)

  • BP on 22/04/2013 9:45:00 AM

    There is a lack of understanding within the industry in terms of what does and doesn't need to be included in a Statement of Advice. Many advisers don't truly understand what does and doesn't need to be incorporated into a SoA from a legal perspective. Similarly, a lot of auditers and compliance people don't truly understand the ins and outs of what needs to be in the document, erring on the side of caution and relying on a "tick a box" approach to reviewing SoAs. I have seen some terrible advice - which is "compliant" from an SoA perspective and similarly some really great advice which isn't "compliant" from an SoA perspective.

  • Tony Bates on 19/04/2013 12:28:13 PM

    SOA is as Easy as ABCD.
    My name is AB, I work for CD who is owned by EF and licenced by GH. You should do I and J because of K and L. As a result you should expect M and N, but also be aware of the risk of O and P. I also considered Q and R but preferred I and J which will cost you S and T. If you accept my advice within 30 days I disclose I will earn U and V. I have based this advice on W and X and cannot accept responsibility of Y and Z.

  • alleycat on 19/04/2013 11:25:40 AM

    Dear M/s Cruz,
    If you asked the majority of planners, we would like to able to cover off on the basics.
    Such as, here's where you are, this is what you want or where you'd like to be, this is our recommendation and why and here's how much it's going to cost.
    Oh... if only it was just that simple !!

    Unfortunately ASIC and compliance teams have said "know your client" and "know your product" as the starting point.
    Then they want us to disclose other things considered in the proposed recommendations/strategies, benefits won or lost as a result of those proposed strategies, costs involved in any changes, current MERs and proposed MERs, and so the details continues.
    Does it protect everyone ? probably not but from a legal stand point until someone who actually earns a living doing what we all do every day comes up with the perfect SOA solution that benefits clients and advisers alike, this debate will sadly continue.

  • Mountain Man on 19/04/2013 11:11:16 AM

    I agree GAB - If I dont do at least 110 pages then compliance could fail me and there goes my business. Most of my mum and dad clients do not understna half the legal jargon I include (all because compliance states I must).

  • Mott on 19/04/2013 11:10:01 AM

    First comment is completely right. This is almost entirely due to legal and compliance constantly adding cumbersome compulsory sections to SOA's which add no value to the client and are aimed solely at attempting to limit the licensee's liability if something were to go wrong (which it fails to do anyway).

  • GAB on 19/04/2013 10:48:02 AM

    Hey don'blame us...blame our LEGAL teams and compliance teams. If we don't do as we're told we get a bad audit. We'd love to do small SOAs, hell, we'd love to do no SOAs. Unfortunately most of us are licensed to an entity who makes the rules....we just folloow them

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