MEDIA RELEASE: Removing lengthy Statement of Advice (SoA) documents does not mean that advisers no longer need to produce a financial plan and regularly review that plan, according to co-chief executive and co-founder of fintech Padua Solutions, Matthew Esler.
"Much of the industry were wrongly suggesting the removal of the SOA or ROA meant you weren’t required to produce the financial plan or review. They have now realised that getting rid of an SoA doesn't mean that you're getting rid of the financial plan or you're getting rid of the review. We are moving away from the safe harbour steps but we are still going to have best interest, and we're now also going to have the good advice requirement,” he said.
SoAs and RoAs are set to be removed as part of the Quality of Advice review recommendations accepted by the Federal Government.
Although new documents are expected to be less prescriptive, Mr Esler said it will now be in advisers' best interests to outline to clients how they are creating value through various technical strategies suggested.
"If you look at how much time it takes to produce advice at the moment, I don't think a lot of that time is going to disappear by getting rid of the SoA document. When a client meets with a financial planner, they are going to expect a financial plan. You are going to need to highlight their existing situation, the benefits of the recommendations, the cost of that advice and the value your plan will create.
"As fiduciaries, it's really important to highlight to the client what their existing situation looks like and where they are headed. Then, based on the recommendation, this is how much closer they will be towards achieving those goals,” he said.
Financial advice technology solutions are going to be a key part of helping advisers in this process. Mr Esler said up until now, the technology in the market struggled to provide different scenarios that advisers can present to clients in an engaging way.
"We’re starting to see a heavy shift in focus toward technical strategy, largely as a result of the compliance environment becoming more certain, which is leading to more advisers engaging approach in the provision of advice,” he said.
Mr Esler is concerned that because of the myriad of pressures on the rapidly shrinking number of financial planners in Australia, they have not been able to provide the best technical strategies to clients.
"The technical strategies we employed in the early 2000s were far broader than the technical strategies being employed today.
“That means that advisers are potentially leaving benefits - concessions, rebates, deductions, offsets and the like - off the table, which means the benefit that's being afforded to the client has been lowered,” he said. High-quality technical strategy creates tax and other benefits for clients that are “certain” over and above the uncertain returns through investments.
Advisers need financial advice technology that provide them guidance on the maximum quantifiable benefits of implementing those strategies so they can discuss them subjectively with clients based on the needs and objectives.
"Being able to show what the maximum quantifiable benefit of each strategy is, is incredibly powerful, and something that has never existed in the industry, but with advancements in tech, it's something that is going to exist in the industry in the near future,” he said.
