Government issues SOA relief

Proposed changes that could shorten the length of disclosure documents and bring much needed relief from burdensome Statement of Advice (SOA) requirements have been endorsed by the financial planning industry.

As part of the 25 proposed changes to the Financial Services Reform Act (FSRA) announced by the Parliamentary Secretary to the Treasurer Chirs Pearce last week, advisers won’t have to provide an SOA for information they give following the issuing of the initial SOA — but only if the original basis of the advice does not change.

Financial planners would instead have to keep a record of subsequent advice for seven years, available at the client’s request.

Pearce, who said the long awaited proposals have been released for discussion until June 3, was unavailable for comment last week, but industry representatives contacted by Money Management interpreted the refinement as applying to Statements of Additional Advice (SOAA).

Organisations like the Financial Planning Association (FPA) and the Investment and Financial Services Association have welcomed the proposals, which also recommend that advisers should not be obliged to include information in an SOA on alternative strategies or products that do not form part of their final recommendation.

Other proposed refinements include allowing financial services groups to remove the more generic information from Financial Services Guides (FSG) and tailor the documents to their specific products. Some information in FSGs that is duplicated in Product Disclosure Statements (PDSs) will also no longer be required.

FPA chief executive Kerrie Kelly said the proposals would prove a solid base for ongoing consultation with the Government.

“Unnecessary or over-burdensome regulations, such as the existing SOA requirements, increase the cost of providing financial advice, putting it beyond the reach of ordinary Australians,” she said.

Fiducian managing director Indy Singh said: “We are happy with the direction that the Government is taking, which is a movement towards sanity.

“Particularly with the SOA changes where you don’t have to have a 100 page document and the adviser doesn’t have to explain every product under the sun.”

Also endorsing the proposed changes was the Australian Securities and Investments Commission, which announced that it will undertake eight projects arising out of the 25 proposed changes, one of which will involve releasing a model SOA.

Although they expressed happiness that the refinements could translate to creating less paperwork, financial planners contacted by Money Management were cautious to offer a complete endorsement.

Leishman Financial Services director and past Money Management financial planner of the year finalist Simone Vanden-Driesen thinks “the proposals don’t go far enough to discussing what they’re proposing”. She said the Government needs to be more specific on what constitutes a change in the basis of the original advice.

“Now I have to provide a SOAA saying that we’re going to change the exposure to an investment even though my clients have agreed that they are a certain investor profile and even though they’ve agreed to us managing the asset allocation of that profile.

“On cost, I believe an adviser should be assumed to be intelligent enough to explain to the client whether there’s a cost involved and what that cost will be and that shouldn’t have to be in a five to 10 page document.”

Vanden-Driesen also said that the proposal to exclude any mention of alternative solutions should be changed to include any strategies that the client may not choose but that the adviser knows are in the client’s best interest.