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Flipping the perspective: What is a fit-for-purpose SoA?

Assistant Treasurer Stephen Jones has finally broken his silence on the QAR recommendations, controversially to a group of superannuation executives. He has identified 14 to 22 recommendations for fast tracking, among them replacing “the unwieldy statements of advice with something that is fit for purpose”.

It’s an exciting prospect. When implemented it will mean long, cumbersome, time-consuming and wasteful Statements of Advice (SoAs) will become a thing of the past.

Michelle Levy delivered her final recommendations before Christmas. Among them was recommendation nine: that written SoAs be produced only on the client’s request. In the six months of mostly silence from the government that ensued, industry commentators filled the void. Various experts pontificated on what it might mean for financial planners, AFCA, ASIC and even professional indemnity insurers.

Ironically, there has been very little analysis of the ramifications for the recipients of the SoA, the client.

Purpose of an SoA

In research conducted in late 2021 for the then FPA, MYMAVINS explored the perspectives of clients to how they would react if the written statement of advice was replaced by a video recording. The findings of the research have been made available on FAAA’s member portal.

By doing the research, we gained insight into the various hats of utility SoAs wear in the client’s mind.

For clients, SoAs serve three purposes: (i) they inform the client so they can decide on the advice; (ii) they are also a useful prop to use when discussing the advice with third parties; the spouse, accountant, or a trusted friend; and (iii) SOAs act as a kind of insurance policy providing protection should things go wrong in the future.

Something has got to give

It’s clear the current approach to SoAs isn’t working. As a way of informing the client, it is completely ineffective, with only the most anxious clients reading the document at all. Most don’t read past the third page.

For that reason, current format SoAs are ineffective as a record of the advice to share and discuss with trusted confidants. But, interestingly, as a reference to pore over in the future should things go wrong, clients take comfort in the long, unwieldy, legalistic SoA format of today.

What is fit-for-purpose?

In his speech to the super fund chief executives, Minister Jones said that the Government will replace the long SoA documents of today with something fit-for-purpose.

So, what does something fit-for-purpose look like through the eyes of the client? Well, it’s something that can simultaneously inform the client, support a conversation about the advice after the meeting and be an effective record of what was agreed if things go wrong in the future.

Ultimately, clients are seeking a short resource that effectively summarises what they are seeking to achieve, the strategic recommendations, any product recommendations, and a conclusion on how the advice meets their needs. If it were written on paper, it would be a 1-to-3-page document. But it doesn’t need to be paper based. In most cases a video recording properly indexed and time stamped will suffice.

Perhaps producing a video is redundant in the era of generative artificial intelligence. Clients could interrogate their digital records, asking via a chatbot for explanations of financial concepts, and enquire about the strategies recommended, any product recommendations and how the advice will meet their objectives.

There is no doubt the Government’s intention to simplify SoAs is a positive step for consumers and advisers alike. If implemented, the changes will mean better client outcomes, better client experiences, greater efficiency, and improved accessibility of advice, which is good for individuals, their families and their communities.

Jason Andriessen is a consulting partner at MYMAVINS

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