Simpler Statements of Advice could be the key to consumer satisfaction, an unpublished research paper by financial planner and doctoral student Ben Neilson suggests.
Neilson’s paper, ‘Investigating the Impact Financial Content Structure has on Consumer Appreciation’ – which forms part of his PhD with the University of Queensland – argues there can be benefits to SOAs if the content is structured properly.
The thesis comes as the government considers acting on Recommendation 9 of the Quality of Advice Review, which proposes eradicating SOAs, although shorter documents are more likely to be the direction the government pursues.
“Practitioners may be able to increase consumer relationships by implementing [the research] findings in professional practice,” the paper states.
Neilson, a managing partner of Neilson & Co Wealth Management in Branxton in the Hunter Valley, says he supports the QAR’s recommendation on SOAs; however, his research will still be relevant to whatever form advice documents ultimately take.
“The recommendation gives us the opportunity to re-sign and, most importantly, streamline the creation of financial recommendations,” he tells Professional Planner.
“[SOAs] take far too long to create. Consumers are just unwilling to wait [a long period of time] for a document that’s not often decipherable for them.”
As part of his research, Neilson looked at the most impactful elements of SOAs: the recommendations themselves. He found that providers can ensure more effective communication by streamlining all the content advisers tend to put in the documentation.
“Instead of having four or five pages of [detailed content, the research recommends one page containing] three impactful sentences, bullet points,” he says, adding that the things consumers care about should be included are the things that the consumer cares about.
“You can put the other stuff somewhere else. You can put it in the client file, you can put it in a hyperlink – you can put it in anything else.”
This simplification of financial content and documentation results in “a significant reduction in both creation time and content size”, according to the paper.
Antagonise and annoy
Neilson believes the most significant barrier to re-designing financial documentation is advisers’ unwillingness to accept innovation.
“How often, if ever, has an adviser gone to their clients and said, ‘What do you think about this document? Do you really think it’s worth several $1,000 a year?’” he says.
“If we simply change the content, we kick it across and we make it a document that the consumer actually wants to read. It’s literally as simple as removing unnecessary content. We’re not saying don’t include it; we’re simply saying don’t give it to the consumer in paper form.”
“If you knew [the content confused and overwhelmed] your clients, would you not want to make a change?”
Neilson admits that his research may be seen as antagonistic.
“I say these things to annoy advisers, to make them challenge us, so that we can then outline how to be better,” he says.
“Because if we’re not better, we’re dinosaurs.”
During the Professional Planner QAR Roadshow in March, Minister for Financial Services Stephen Jones ruled out scrapping formal advice documents outright.
“It is important when somebody is sitting down with a financial planner and gets a piece of advice – comprehensive or otherwise – that they walk away with a bit of paper,” Jones said.
“Even if we said they didn’t have to [give a document outlining the advice given], the overwhelming majority of licensees and financial planners would ensure they did.”
Neilson’s paper follows his first research article in May, which argued that the development of artificial intelligence tools like ChatGPT will, at best, complement professionals rather than replace them.
Great insights Ben as always! Love this “Because if we’re not better, we’re dinosaurs.”
Too much focus is put on guessing what the “average” consumer wants to see. This by default always assumes a dumbing down of advice content for consumers. Yet in other markets, the exact opposite is happening. The failure of advice to translate value to consumers (regardless of fault) means that stakeholders do not understand what consumers want.
As Henry Ford said, “If I had asked people what they wanted they would have said faster horses”.
My two cents, the actual advice process and data have to be right first then the digital solution to provide the summary can be customised by the consumer and/or adviser (depending on who is expressing the value in the advice). Disclosure means all research and records are available to the client to access.
Best practice and market practice only align when consumer needs are front and centre.
With everything in life, there are things that are going to make us all inspired, fearful, comfortable, lazy, provocative, submissive, cause procrastination and after all that, then provide the push to get stuff done.
The moment you are forced to do things that fall outside your comfort zone, then the mind can start twirling and bad thoughts can infiltrate.
This is a good thing, as it enables you to go back to our primordial reasoning and subconscious, “fight or flight” response that was crucial to our survival when a saber tooth tiger or lion popped up in front of you.
We no longer have to worry about saber tooth tigers, though there is still something far more dangerous lurking in the background, ready to pounce and that is, vested interest Federal, State and Local Government, Public service, Big Business, Lawyers and Education lobbyists who strongly advocate for you to submit to their version of infinite wisdom, which just happens to feather their own nests, usually at small to medium Business and the wider communities expense.
The provision of clear and concise information that a customer can understand and is willing to read, is what they have wanted for millennia, though the gate keepers ( Lawyers ) have always been able to cajole, infiltrate and put themselves into positions of power so they can control what information goes out to the uneducated, unwashed masses who must be protected from themselves and learn to obey the GREAT WIZARD called the Legal Profession.
So what we end up with 100% of the time, is Legalize mumbo jumbo that may as well, ALL be written in Latin.
Back to the fear part of the equation.
Licensees, Advice Practices and Advisers understand that they are at the mercy of the demi-gods, which are an exclusive club known as the Legal, Compliance and Judicial system.
It is all very well to go back to the future, with less paperwork, though if that then can increase the chance of being sued and losing your Business or home, then what ACTUAL advantage are we being put back into?
Clear and concise with less Legalize is a good thing.
Proper protocols and protection for clients and Advise providers, so we can all just get on with building up our Businesses for the benefit of all, without the chains and anchors that have held us all back over many years, is paramount.