Letters of Advice are the way forward
Costs of advice will fall if advisers can provide clients with a succinct investment strategy document instead of lengthy Statements of Advice (SoA) documents, says Centrepoint Alliance’s Paul Cullen.
Last year, the Financial Service Council (FSC) lobbied to do away with mandatory SoAs in exchange for scalable Letters of Advice (LoA).
Speaking to Money Management, Centrepoint Alliance group executive advice, Paul Cullen, said the Australian Securities and Investments Commission (ASIC) had relied on a disclosure regime to protect consumers which had not always been effective.
“Through the Government, [ASIC] have introduced a whole range of other consumer protection measures, but they're still left the disclosure regime in place,” he said.
“So you've still got advisers tussling to produce SoAs, which are exceptionally long, exceptionally complex, and the clients don't read them.”
Centrepoint Alliance, general manager licensees, Allison Dummett, said many of the principles in an SoA were already enshrined in the FASEA code of ethics.
“So for example, you don’t necessarily have to have a written document that shows product comparison, benefits lost and gained in the document itself,” she said.
“What you want to do is make sure that the adviser considers those things when giving the advice which is what the code obliges them to do.
Dummett, who was part of the LoA working group at the FSC, said while LoAs would not strip out all the costs of producing advice documents, it would make it a much better experience for the consumer.
“I’ve been around long enough that I remember when no advice documents were required – nobody advocates going back to that,” she said.
“That was a ridiculous state of affairs, clients deserve to have a record of what’s been discussed and something that they can make a decision on.
“If we can get a shorter document then that’s going to help everyone.”
AUTHOR
Liam Cormican
Recommended for you
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.
Estimates for the calendar year 2024 put the advice industry on track for a loss in adviser numbers as exits offset gains from new entrants.
Adviser Ratings shares five ways that financial advice changed in 2024 with an optimistic outlook for 2025, thanks to the Delivering Better Financial Outcomes legislation.
National advice firm Invest Blue has announced several acquisitions, including the purchase of an estate planning and wealth protection business Lambert Group.
