A focus for the FSC in our review of financial advice laws is finding opportunities to streamline regulation that is holding back the industry from delivering lower cost and higher quality service to consumers.

It can take around eight hours to prepare a Statement of Advice (SoA) – an entire working day. This occurs for each client, who will pay on average $3,000 for that work.

Technological solutions to improve the value of advice and the speed of compliance are slowly emerging, but technology is not necessarily a silver bullet. Two in three Australians support reduced documentation to reduce the cost of financial advice, and simpler advice documentation could be implemented now.

The law governing the Statement of Advice is simple – it must be clear, concise and effective – however, few people could show you a Statement of Advice that meets that requirement. The current experience with call scripts, checklists and guides is undermining the seamless experience that consumers require. It diminishes the ability of the consumer to understand and make an informed decision due to an overload of information and financial jargon.

Why is this so?

Something strange is going on between the law of the land and the compliance teams directing advice businesses as to their legal obligations. And we are finding it to be the very nature and standards of regulatory guidance or other instruments.

Regulatory Guidance such as ASIC’s RG 90 Example Statement of Advice – one of many Regulatory Guides that exist to support compliance with the law – have confused how compliance teams are ultimately meant to apply it. It’s fuelling caution in a climate of uncertainty as businesses await open-ended incoming breach reporting requirements and a regulator, itself under pressure to investigate breaches of laws that do not necessarily penalise harm to consumers.

The solution, our Green Paper proposes, is to abolish the Statement of Advice, replacing it with a Letter of Advice limited to:

  • the advice sought;
  • the relevant circumstances to that advice; and
  • a clear rationale and recommendation for that advice.

The fact finding to understand a consumer’s circumstances has a significant impact on the consumer’s experience, but much of the advice process could be filed away. This would allow a new, consumer-driven advice process, that provides only the information they need, and not the unnecessary compliance detail.

The ultimate intent is to ensure documentation requirements target the specific advice needs of consumers and communicate the advice clearly. The sun is setting on the days of long-winded documents. Other jurisdictions have already established regimes for limiting disclosure.

In Germany, reforms have been implemented to improve readability of the ‘information sheet’ provided to a client receiving advice. It must be no longer than two or three pages, be clearly written and include all the information needed to support a consumer’s decision. Importantly, consumers must receive it in a “timely manner” before a transaction is progressed. It would seem this avoids the practice of using an advice document as a disclosure document.

Constructing a 21st century advice system means not just making the advice process more efficient, but the most efficient in the world at meeting consumer needs and keeping consumers protected. It means financial advisers should be enabled to invest their time in the consumer relationship and strategy they are qualified to offer, not form-filling and looking over their shoulders.


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