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Two gold cogs with regulatory and compliance written on them for ASIC

Changing SOAs to LOAs is futilely tinkering at the edges

By Mike Taylor7 February 2022

The complexity and length of statements of advice actually goes against the intent of the underlying legislation that they be clear, concise and effective, according to Synchron’s new compliance chief, Phil Osborne.

What is more, Osborne suggests that moving to a letter of advice will not actually address the issue because it amounts to playing with semantics.

“Discussions around what to call the advice document don‘t actually address the core issue – which is the unnecessary length and complexity of Statements of Advice,” he said. “Calls for a ‘Letter of Advice’, while highlighting the issue, is looking in the wrong place for the cause of the problem.”

Osborne said that Synchron believes the solution is in fact far simpler than a name change.

“We can either take years going through the process to discuss and legislate and change the name of the document, or we can act today and choose to follow what the Corporations Act already requires us to do, and that is to have an SOA that is, ‘worded and presented in a clear, concise and effective manner.’”

Osborne referenced section 947B/C(6) of the Corporations Act, the section that directs that a Statement of Advice must (not “could” or “might”) be clear, concise and effective; something that Synchron sees as being generally ignored by industry compliance regimes.

“Section 947B/C(6) is as much a legal requirement as the need to act in the client’s best interests (section 961B) or to provide additional information in the event of recommending a change of financial product (section 947D),” he said. “Yet for some reason, compliance regimes don’t seem to recognise this, instead requiring more and more to be included in the SOA – not for the benefit of the client, but for the sake of so-called ‘best practice’.”

Osborne’s sees a big part of his role at Synchron as recognising where the advice documentation in place doesn’t meet this obligation, and to develop versions that will both meet the letter and spirit of the legislation, while creating a better experience for both advisers and their clients.

He argued that what seemed to have been forgotten is that best practice is about what’s best for everybody. “We need to consider what is best for the client and best for the adviser,” he said. “A purpose that a shorter document would definitely serve.”

Blaming the disclosure regime also misses the mark, according to Mr Osborne.

“Regulatory Guide 175 is clear when talking about disclosure and the need to be clear, concise and effective, directly in keeping with its counterpart in the legislation,” he said. “While everyone is very quick to point fingers at legislation and the regulator, that isn’t where the blame lies.

“The work that ASIC has done recently on advice documents as part of their affordable advice project has highlighted that they don’t believe long documents are in the best interests of the client either, regardless of the disclosure regime.”

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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conundrum
4 months ago

All advisers know this is great in theory until the client complains and AFCA then have full scope to review the whole file NOT just the specifics of the complaint made…so it is impossible to the cake and eat it too in this regard, a short, clear and concise document that invariably leaves non essential information out only to be attacked for that lack of detail in a complaint and review of the file.