Just days after the MFAA told the government it wasn't happy with three different disclosure documents, advice out of ASIC says the regulator likes it short and sweet.
The AIOFP (an association of financial advisers) has confirmed the outcomes of a recent meeting with ASIC’s Statement of Advice (SoA) experts. Financial Advisers - much like brokers - give SoA's to their clients to explain the basis and content of their advice, and dislcose any conflicts. However, SoA's sometimes number as high as 100 pages - tough bedtime reading for any client.
AIOFP executive director Peter Johnston said he did not think compliance groups and lawyers would be particularly happy with ASIC’s guidance to its representatives during the meeting.
“It has suited the commercial agenda of compliance groups and the many lawyers who have been living on our fees for years to run a ‘scare campaign’ to keep us on a diet of enormous SoAs,” Johnston said. “We all walked away from the meeting feeling very satisfied that the days of large SoAs are over.”
The key messages put forward by ASIC at the meeting in relation to SoAs were:
• ASIC would like to see much shorter SoAs. Long SoAs don't speak to consumers and often paint a confusing picture of the advice being provided. SoAs need to tell a story – a consumer should be able to understand the advice and the pros and cons of the suggested approach. They should also know how much the advice is costing them. According to ASIC consumer research, most consumers only want and will only read a three-page advice document
• ASIC has released a number of short example SoAs. These examples are contained in RG 200 and CP 164. Many of these examples are only two pages and are deemed suitable for simple advice. Where advice is more complex, the SoA might need to be a bit longer to deal adequately with all the issues
• Many licensees tell ASIC that compliance professionals and lawyers are driving long SoAs. This concerns ASIC and over the next few months the regulator is keen to work with compliance professionals and lawyers to break down any misperceptions about SoA length and content
• Long SoAs shouldn't be used to justify charging clients higher fees. It doesn't mean the adviser has done more work. Advisers should justify their fees based on the quality of advice they provide. Document length is irrelevant
• SoAs need to speak to the client getting the advice. If a client wants more detailed information about a product etc an adviser can still provide this information, but they shouldn't load an SoA with unnecessary and irrelevant detail.
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