Advisers are on the brink of swapping out lengthy statements of advice (SoAs) for shorter records of advice (RoAs) in more scenarios if recent signals from the regulator are consistent with their intentions.
On Monday ASIC provided high-level takeaways from its consultation on advice access (CP 322) to the government, with the two-page document headlined by the finding that advisers want to use more RoAs yet remained constrained by regulatory and licensee restrictions.
“SOAs are a clear cost barrier to providing limited advice,” ASIC stated after trawling through the 469 submissions it received – 244 from financial advisers.
“Respondents have raised that Government should reconsider the SoA requirements and expand the situations when an RoA is permissible instead of an SoA.”
ASIC promised to do better with RoA guidance than what Commissioner Danielle Press called, at a March 19 senate hearing, its “turgid’ efforts to this point.
More importantly, ASIC said it was considering “possible relief to extend the situations where an RoA can be used, for example when providing limited advice or strategic advice”.
On Thursday, the regulator then announced it was extending a relief measure allowing advisers to provide an RoA rather than an SoA to existing clients requiring financial advice due to the impact of the pandemic. Introduced in April last year, this relief will now continue until mid-October.
While the pandemic advice relief is not the sort of dispensation that would be used widely – anecdotally, advisers report very little adoption – its extension on the back of Monday’s news from ASIC highlights how intent the regulator is on finding more ways RoAs can safely and appropriately supplant SoAs.
‘This is good’
According to The Fold Legal solicitor Simon Carrodus, ASIC’s intent to reduce the compliance burden isn’t new.
“I think they turned the corner on red tape a while ago,” Carrodus says. “But you have to remember that ASIC is lumped with the legislation just like the rest of us, so they have one hand tied behind their back.”
The pandemic has actually given ASIC a “sandbox tester” for compliance concessions they may not have otherwise introduced so readily, Carrodus says. “It’s a nice little test sample for them,” he adds.
While the industry is trending towards increased RoA usage, Carrodus notes there are other effective measures for minimising the compliance burden, including managed discretionary accounts, which absolve the need for advisers to produce an RoA for every transaction.
“There’s a clear hierarchy in terms of the documentation burden,” he says. “SoAs are the most work, RoAs much less, and a managed account structure allows an adviser to transact on behalf of a client without producing either.”
ASIC’s efforts thus far – including the relief it provided on early access to superannuation advice – may be limited, but Carrodus reckons the direction ASIC is taking is the right one.
‘I’m a big believer in not letting perfect be the enemy of good,’ he says, “and this is good.”
The scenarios ASIC might consider for RoA usage, he adds, could involve situations where the adviser or licensee changes, but the adviser is free to carry on using SoAs.
At the extreme end of the spectrum advisers could be freed up to use RoAs for up to a period of several years once an initial SoA is provided, he says, provided there are no major changes to the client’s circumstances.
“It also might open things up if they require advisers to give a copy of the RoA over to the client,” he adds. “That could entice ASIC to roll RoAs out more broadly.”
