The “brick of paper” that’s crushing the advice industry

Alex Burke,  Senior Writer,  No More Practice Education

Generally when one hears the words "absurd" and "obscene" from a member of Parliament in a discussion about financial advice, the natural response is to brace oneself for the kind of discourse that was rampant throughout the Royal Commission. 

In this case, though, the pejoratives were not directed at an individual adviser or licensee, or even a broad assessment of the industry's conduct. Instead, the absurdity and obscenity being discussed was the gargantuan size of the average SOA. 

During a parliamentary committee, Liberal MP Jason Falinski was questioning FPA policy head Ben Marshan about the process involved in on-boarding a new client. He wanted to know, essentially, what would need to happen if "I wanted to come and get advice from you now." 

Marshan explained that, based on FPA member research, the average amount of time an adviser spends on the process - from booking the first appointment to providing advice and implementing it - is about 26 hours. And only a fraction of that - three to four hours, Marshan said - involves actually speaking with the client, collecting data and considering strategies. The rest was, for the most part, research and documentation. 

Falinski then asked what he would receive at the end of that 26-hour process - Marshan said he'd get a "brick of paper".

"The reality of what's in the Corporations Act around the requirements for providing financial advice is that there's not actually a lot in there," Marshan explained. 

"In the past," he continued, "ASIC has provided sample SOAs, which cover what the legal requirements are, which are as short as eight to 12 pages. What's not covered in those ASIC SOAs is the fact that we're regulated by eight different regulators. 

"We have numerous complaints and disciplinary systems and processes that financial planners need to comply with, and the only way that a financial planner and their licensee can be comfortable that they've got a defensible position if there is a consumer complaint against them is to produce something that is around 100 pages long, to ensure that every warning, every consideration, every recommendation is documented in such a way that, if somebody picks up that document, they can find a defence for whatever the complaint is."

Because of all these considerations, Falinski opined - not incorrectly, according to Marshan - that "of the 100 pages [advisers] have to hand out to clients, 92 of them are just to satisfy lawyers." 

It's no secret that financial advice comes with a lot of paperwork - both initially and on an ongoing basis. And it goes without saying that that paperwork costs time and money, so it stands to reason that if there is a way (or ways) to streamline advice documentation, both advisers and clients will benefit.

There are multiple proposed approaches to achieving this - earlier this year, the FSC put out a report recommending the SOA be abolished entirely - but we want to know your thoughts. Using new technology or some other means, have you found a way to bring that paper brick down to a more manageable size? 

 


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Paul Rawson

04/08/21

As an adviser with 38 years of experience working in the general mum and dad market I’m bemused that the FPA considers advice can take 26 hours from first meeting. In my experience the process takes more like 80 hours and then from that, the actual time spent speaking with the client, collecting data and considering strategies is more like 10 - 12 hours. I agree that the rest was, for the most part, research and documentation and yes, you end up with a brick of paper that no one reads or values. Now if you want to add implementation to the timeline, you might need to double down on the hours, especially if the clients need Centrelink or Insurance advice implemented as part of the financial plan.

06/08/21

I'm thinking of making them 2 chapters, the first, about 8 pages of what a client needs to know/wants to know to understand the advice, basis, costs, benefits, risks etc in as simple as summary/table format as possible. Chapter 2: the remaining stuff for legal eagles.

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