Having a peer review Statements of Advice before sending it to a client can be very valuable for advisers as the meaning of advice can quickly get lost in translation.
At the Stockbrokers and Investment Advisers Association conference in Sydney on Tuesday, a panel discussed the value of taking the extra step of a quality assurance check, preferably by a trusted colleague.
“A workflow process which pushes out high risk files for an external firm or [for] your compliance team to do a check on is very, very important,” Dickson said.
Although this could add a bit of time in the first stages of producing and sending the SOA, it would help prevent the use of language clients struggle to understand, reducing client confusion in the future.
Behavioural Finance Australia founder and director Simon Russell said when creating the SOA, it was crucial for the adviser to put themselves in the mind of the client.
“It’s just so natural that you use the language that you’re used to, and then you have to put yourself in someone else’s mind, which is an extra step and a bit of an effort to do that,” Russell said.
Russell agreed a review by a peer would be valuable as they might also notice an issue or provide a suggestion the adviser had not previously thought of.
“That’s what I try to do with my writing, to get somebody else to look at it. They’re going to see things that I’m not going to see just because they bring a different perspective to it.”
He questioned how much professional terminology should be used in a SOA template as to streamline the process while providing the client tailored and personalised advice.
“To what extent can we embed that type of language in any template?” Russell said.
He said it would be beneficial if some of the terminology was “already embedded in the document” to save the adviser time when producing the SOA.
MIntegrity co-founder and director Amanda Mark was also supportive of advisers having a peer review the SOA but warned that because language is so familiar, even a second check can miss areas that need to be changed.
“If you’ve got a person in the team that’s good at reviewing these things, they start to become templated themselves,” Mark said.
As a result, the advice could end up not tailored to the client but instead be written in a template form that suits the firm’s norm.
Dickson gave the example of insurance advice as a type of high-risk advice that requires updated, tailored advice when life events change.
“Many older insurance policies do not have specific carve outs for mental health provisions. Most new policies do not cover a whole series of things around mental health,” Dickson said.
“If you switch a client from policy to policy, and they lose that benefit, and then have a claimable event, you are likely on the hook as the licensee.”
Dickson suggests creating a documented outline to the client to show them the ramifications of changing a particular policy and why losing a benefit of the old policy is the correct course of action.
Mark said she had seen a lot of client file reviews where the advice didn’t change despite a major life event that should trigger the creation of a new SOA.
“It needs to be consistent with the client’s portfolio and their circumstances, and they change,” Mark said.
“It’s not just send and forget. And you can’t just do a statement of advice every two years that’s exactly the same.”
“We see advisers use the same template – they pull the same parts in and they don’t tailor it to the client. So how is that personal advice?”
‘Clear and concise’ language
Mark strongly emphasised finding the balance between keeping the advice clear and concise and ensuring the client was educated enough to understand and make an informed decision.
“This is retail advice, so the education of clients is important. You can’t write down things they’re not going to understand, so complex strategies and things aren’t going to work…because you do need to do a lot of explaining on that,” Mark said.
“The key reason is…the client needs to make an informed decision, and it has to be in the client’s best interest. They’re the fundamental two things we’re trying to achieve.”
