Despite scare-mongering by some compliance experts and lawyers, the best interest duty will not be the downfall of the concise SOA.
AIOFP compliance specialist Frank Smith has sent a matter-of-fact email to members of the association to put their minds at ease. Smith says that the financial services compliance industry and “certain segments of the legal fraternity”, are trying to burden advisers with another layer of unnecessary “compliance”.
“This time the best interests duty is being used as the excuse with statements in the press made that this will make Statements of Advice even longer than many of the encyclopaedias we already have today,” says Smith.
Under the Corporations Act, there has been no change to SOA requirements as a result of FoFA, he says. So the SOA still has to be presented in a clear, concise and effective manner, and the level of detail included remains unchanged:
A statement setting out the advice
Information about the basis on which the advice was/is given
Name and contact details of the provider
Disclosure of any remuneration or benefit that might have influence over the advice
“It’s worth remembering that the SoA, while being a written record of the advice, is rarely the advice itself because in almost every case this has already been given verbally in meetings with the client,” says Smith. “In any dispute it is the client’s recollections of what took place in these meetings that is the focus of the arbiter in resolving the dispute.
“Recent press announcements indicate that financial planners will continue to represent the profession most vulnerable to litigation. In other words the feeding frenzy of law firms is set to continue while professional indemnity insurance is still viewed as a consumer protection measure rather than a risk management tool.”