As a financial services lawyer and compliance adviser I have, over many years, reviewed more statements of advice (SOAs) than is probably healthy for one person. However, I can share some insights and learnings about what makes the difference between a good SOA and a bad one. And believe me; they each stand out like sore thumbs.
The scope, the whole scope and nothing but the scope
So often an SOA lives or dies by the scope. Two of the most common problems are: meaningless, non-descript scopes and scopes that don’t fit the content of the SOA.
Undoubtedly, scoping effectively takes effort and practice. But it’s not rocket science. While this article is too brief to articulate how to scope effectively, a good starting point is what a scope is not. An effective scope is never a one-word description such as superannuation or insurance!
Maybe it’s easiest to look at the scope this way: what is the problem you are being engaged to solve? Effectively express that and you will have nailed an effective scope.
Why? That is the question
One of the primary goals in drafting an SOA should be to explain the rationale for your advice. That is, not only explain the advice but clearly draw the connection between the client’s circumstances and needs and how and why your advice will help them achieve their objectives.
The rationale should never, ever be “to ensure I get paid”! Unfortunately, I have seen this more than once in SOAs, particularly where the adviser has recommended a platform that allows them to collect their fees via the platform. The rationale must always be directed to what the advice can do for the client.
We’re all individuals. I’m not! The problems with generic, untailored text
Of course, most SOAs these days are based on templates. But these should just be the bones, ready for you to add the flesh. Typically, an adviser has had numerous conversations with a client and has a deep understanding of them and their needs before they put together an SOA. The SOA is the place for you to show off everything you’ve learned about the client and describe how your advice is going to help them achieve their objectives.
Too often, generic text and little else is included in SOAs. Take away the client’s name and the advice could apply to Client A just as much as Client B, C, D and E – it is bland, meaningless and untailored. Worse, the advice can look pre-determined.
The best SOAs really hone in on the client’s unique circumstances and clearly describe how and why their advice is going to help them achieve their specific objectives.
It’s all about the attitude
As an independent, external reviewer it stands out very quickly which advisers merely produce SOAs because they have to and which ones relish the opportunity to showcase their professionalism and how much they have understood about the client’s needs. The best advisers use their SOAs as a promotional brochure.
An SOA is your chance to shine. Treat it that way and all of a sudden all your SOAs start looking like gold.
Ian McDermott is principal lawyer with imac legal & compliance, a law firm and compliance consultancy specialising in small and medium-sized financial services businesses.
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