ASIC finds SOAs not making the grade
The average Statement of Advice (SOA) prepared by financial planners is full of jargon and unnecessary information, but lacking in key disclosure elements, an investigation by the Australian Securities and Investments Commission (ASIC) has found.
In a position that could put ASIC at odds with many advisers, who believe the often unwieldy length of SOA’s is the result of increasing compliance requirements brought on by Financial Services Reform, the regulator said today that “repetition” and “superfluous material” were making the statements unnecessarily long.
The ASIC investigation, involving a review of a series of SOAs provided by industry associations, has prompted ASIC to release further guidance on SOAs today in an attempt to address these concerns.
ASIC executive director of financial services regulation Ian Johnston said if SOAs are to be meaningful, they had to be able to be understood by consumers.
“ASIC expects SOAs to be worded and presented in a manner that is clear, concise and effective,” Johnston said.
The review also found SOAs were not being tailored to the client and so contained some irrelevant information.
Johnston said advisers had been falling short of the mark by failing to disclose costs, loss of benefits and other significant consequences for clients who switching between financial products, whilst others were not providing effective disclosure of remuneration and benefits.
“Information about the consequences of switching is specifically required by the Act and is relevant to all types of financial products. These requirements will be especially important in the context of the choice of superannuation fund regime that commences on 1 July 2005,” Johnston said.
Chairperson of the Financial Planning Association (FPA) Kathryn Greiner, addressing delegates at the associations annual general meeting yesterday, agreed.
“As we head into 2005 we are going to see financial literacy right up there in front with the big community issues and that combined with super choice really underlines some of the challenges ahead for us,” Greiner said.
Pre-empting ASICs latest guidance on SOAs, the FPA last week released a practical guide on constructing SOAs to its members.
“If we wish others to take us seriously we have to evidence the highest standards of professional performance,” Greiner said.
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