If you google "Statement of Advice (SOA)", a consumer will discover these top 3 ranked items:
1. What is the purpose of an SOA?
To provide an outline of a financial adviser's recommendations to help consumers achieve their needs and objectives.
2. What makes a good Statement of Advice?
It should provide clear, concise, and effective information to your client, allowing them to make a fully informed, educated decision.
3. How long does it take to prepare an SOA?
From the first meeting with the client to presenting the final SoA to the client, the timeframe is about three to six weeks.
Consumer view of an SOA
We all know that an SOA is not entirely effective, it isn't valid after 30 days, it's full of jargon and clients simply file them in their drawer, never to be looked at again.
So, can we really say on behalf of consumers that the value of financial advice sits within an SOA document?
A research study conducted across financial advice clients in Australia were asked if they understood their Statement of Advice? The answers were unsurprising.
• 24% did not read their SOA, yet agreed to the advice
• 43% were confused by the content & language, yet agreed to the advice
• 33% understood it enough and agreed to the advice
• 45% overall said they want to be involved with their plan, with more knowledge
With statistics pursuant to the above, there is an extremely large disconnect between financial advice and how advice is valued, presented, and consumed - especially for today's tech-savvy consumer.
How well do consumers understand financial advice?
With 43% of consumers surveyed stating they are confused by the content & language of an SOA, how well can consumers actually understand financial advice?
The evidence clearly suggests that SOAs are of no real value to most consumers, and with so much emphasis on the value of advice toward an SOA document - this presents a major concern for this evolving advice profession.
So, what do we want our clients to know and understand about financial advice?
Is it the potential possibilities they have for their future, understanding basic financial concepts, or helping them to stay motivated along their advice journey, or is it the ability to make clear informed decisions?
We'd say it is all of the above!
Technicalities of an SOA are all too confusing and may not necessarily affect a client's situation, the focus should be on what outcomes clients want to achieve to meet their ongoing needs throughout different life events and stages. If clients are part of the journey and the advice experience, they have more of a chance of understanding the advice they are seeking.
If we as an industry could demonstrate advice in a much more simplified and interactive way that could personally relate to today's tech-savvy consumer, we could easily illustrate the positive impacts that financial advice can have on a person's life.
The compliance fallacy
Unfortunately, the intention of an SOA is to avoid litigation, and this is far outweighing the needs of consumers. Whilst this continues, the SOA is going to resemble an old-school phone book and consumers will remain deterred from a customer experience perspective.
In all our learnings from the Royal Commission, and with all the legalities that go into SOAs, the fact still remains that pages of legal jargon does not provide a licensee with the protection they seeking.
There’s nothing in ASIC’s regulatory guide (RG175) that states that an SOA needs to be a long paper document.
This is where a balance can be achieved between compliance and providing a financial plan as a smartphone digital app - providing consumers with financial advice in a way they can relate to.
In fact, digital SOAs are far more compliant than paper documents - they can be tracked, automated, and audited instantaneously.
Advice delivered via a digital app means clients' details become real-time, advice recommendations are clear and thorough via various scenarios an adviser and client can co-created together. More importantly, it can be easily followed per the client's objectives - the goals they want to track and achieve over time.
Ongoing services, fee disclosure, opt-ins, SOAs, and all the compliance items that advisers need to keep in check, can be automated in this digital world. Just as you would log in to see your fees and statements in your banking app, financial planning in a digital realm makes compliance simple.
The cost of advice also becomes less of an issue with clients because advisers are better able to demonstrate its true value, and digital lowers the cost to deliver.
Redefining the value of advice
Consumers are only interested in buying a solution to their problems, not an SOA document. They aren't coming to an adviser to help them outperform a market by a percentage; they are wanting to know how they can buy their first home, send their kids to private school, or retire with enough.
They want an adviser to articulate how they can bridge the gap of where they are today, to where they want to be in their future, in alignment with their financials and life goals.
They need help removing roadblocks, understanding their drivers, motivations, intentions and behaviours, unleashing a clear pathway with measurable outcomes that can be tracked ongoing.
That is the true value of financial advice consumers are seeking!
What elements will shift the value of financial advice in this next decade?
By taking a consumer-centric lens, we can align advice towards a client's goals - let's take a look at advice through technological advancements and behavioural coaching.
How behavioural coaching will increase the value of advice?
Behavioural coaching can enhance your client experience and take them through a more engaging advice journey.
Financial issues have a psychological element and a person's behavioural patterns and beliefs can prevent them from achieving financial success and their goal attainment. These act as blocks and barriers and need to be identified and worked through with the client. There is very little help on behavioural money coaching, and this does tend to fall on advisers, yet the soft skills needed to support this aspect of advisory is not widely accessible.
Advice only works if it is aligned with the client's values & behaviours.
A client's values and behaviours are significant contributors to the success of the advice an adviser provides. The way consumers value money stems from personal ideals and beliefs, usually adopted from childhood and their environment. As an example, a person may value money toward status or power, and this impacts many of our subconscious decisions around money. Values influence everything we say and do - especially our behaviours.
The way people act and respond toward money plays a significant role. As an example, these behaviours include our self-control, motivations and optimism and they influence the way we have a relationship with money.
By understanding a client's behaviours, an adviser has a higher chance of helping their clients to achieve their desired outcomes.
This not only has a positive influence on clients, but it has a significant upstream impact on an advisers bottom-line and growth, as it is strongly aligned to what the consumer wants. This means more referrals from happier clients who understand the true value of advice and can articulate this to their friends and family.
How technology will help measure successful client outcomes?
Smart technology will soon play a significant role within the value proposition of financial advice. Consumers simply don't want a static 50-page document. They want to explore possibilities visually and discuss future scenarios in real-time, they want to interactively co-create their plan with their adviser.
Clients want their financial plan to bring their today and future together, quantifiably. A digital plan that links their goals to their cash flow, to their investment portfolios, and advice strategies - they want to see how they're tracking to specific outcomes (goals).
Digital financial planning is on our doorstep. A financial plan that's driven off live data, that sends clients personalised notifications telling them instantly if they're on or off track from achieving their goals.
Today's adviser requires a combination of these two skills, human behavioural coaching and technology.
Advice in this context is more powerful, relevant, scalable, and effective!