Regulatory changes have seen a drastic improvement in the quality of Statements of Advice, there is still room to improve the evidence behind the advice process according to a pair of compliance experts.
Fourth Line has reviewed over 10,500 SOAs in the last four years ago and 5000 since ‘Red October’.
Fourth Line CEO Joel Ronchi tells Professional Planner there has been a drastic focus on improvement over the last four years.
“Very rarely we’ll see the [type of advice] from 20 years ago where it’s just product focused,” Ronchi says.
“The issues we pick up and around advice process; the way the adviser has gone about creating that documented evidence they put together.”
The findings are similar to observations from Integrity Compliance director Rhett Das who says the quality of advice documents he reviews has improved compared to five years ago.
However, Das cites a few areas where advisers still struggle, including the propensity for advisers to “speak in strategies”.
“I contrast that with solicitors where a client will go to a lawyer and ask for advice and the lawyer will be precise on getting the instructions then write the advice,” Das says.
“A lot of the advice documents we see, the client will come to them [with life details] and you can see all that in the fact find. Then you get the advice document and it goes straight into strategy.”
Insufficient intent
As a separate example, Ronchi points to advice that involves alternative strategies and products, and making sure there is sufficient evidence around the rationale and risk profiling.
“Where flags have been raised in our reports is a result of a lack of sufficient evidence or connection between what the SOA says and what the supporting advice creation documentation says,” Ronchi says.
“It’s not negligence, it’s not poor behaviour or advisers trying to get one of their clients.”
Das previously worked for the Financial Ombudsman Service, the precursor to AFCA, as a panel case manager before a stint at Centrepoint that preceded his current business.
Referencing current AFCA advice ombudsman Shail Singh’s comments regarding viewing files notes, Das says this has been a trend that has long been ingrained since the days of FOS.
“I remember when I worked there,we would often write back to people and say can you please subscribe these file notes because we can’t understand them,” Das says.
“The file-noting piece is important in terms of that informed consent and what actually did take place.”
Making a statement
Das still has frequent communication with the complaints authority in his current role, noting there is consistency to how they approach the review process.
“From that AFCA perspective and my dealings with them still, if the SOA is of poor quality, regardless of how good your files are, you’re going to struggle depending on what the allegation is,” Das says.
“A poor-quality SOA can lead to other inferences. That was the approach when I was working at FOS, that negative inference [would be drawn].”
Ronchi is cautious about giving a blanket response to what recurring issues are found in SOAs but notes the importance of evidence that supports what is in the SOA.
“What I mean by that is whether it’s file notes, fact-finding, or any kind of evidence through that advice creation/client engagement stage,” Ronchi says.
Das says clearly identifying the goal and objective of the client is crucial to following the advice process.
“Some advisers are very good, because even when speaking in strategies they’ll put at the bottom of the advice, this will help you achieve [a specific] goal,” Das says.
“Another thing i see a lot of is advice documents that are also a value proposition or incorporate a service agreement. Whether it’s templated or not but what falls through in that document and what’s delivered elsewhere doesn’t always marry up.”
“Regulatory changes have seen a drastic improvement in the quality of Statements of Advice.” Really?
Not according to consumers, or the Quality of Advice report.