The Australian Securities and Investments Commission (ASIC) can go much further in improving its example statements of advice (SoA), which falls short in many respects, particularly in today’s digital age.
In August 2017, we submitted our thoughts to ASIC in relation to its Consultation paper 284, looking at the improved use of SoAs. We’re pleased to see the Financial Planning Association (FPA) has agreed with a number of our suggestions, which would make SoAs more suitable for tech-enabled humans.
We believe several changes are essential to deepen consumers’ understanding of financial advice in the statement. The language in the example SoA is at times too complex and should be expressed in plainer English that can be understood by more people.
Today’s Statements of Advice (SoA) aren't a powerful or appealing way to deliver information – after all, they are produced in a language and format that most people simply don't understand. Far from helping educate clients, this 'foreign language' only seeks to alienate and confuse them.
Convoluted language is a danger within the example SoA put forward by ASIC. It requires consumers to ‘find’ relevant information. Once found, only a subset of consumers would be able to understand the information. The words and concepts are too complex and unfamiliar. Let’s make the complex simple and ‘de-jargon’ the language of financial advice and bring it to life.
There are other areas for improvement in the example SoA. It should begin by outlining the client’s goals and the value of the advice being provided to the client, then disclose costs and what the adviser is being paid. This recommendation has also been endorsed by the FPA.
As it is now, the sample SoA opens with the adviser disclosing their self-interests. The danger with this is that consumers may immediately form a negative perception and lose trust in their adviser and the advice given. Is their adviser acting in self-interest from the start, not for the consumer?
Nor does ASIC include digital SoAs in its consultations. The is a significant ommission. Digital SoAs will be the way of the future, given the huge growth of automated financial advice. We believe ASIC should engage with advisers and our technology firm on the concept of digital SoAs. Data shows that 89% of decision-making is carried out by consumers on mobile devices. Current word document SoAs are out of date before they are printed given they don’t accommodate digital advice delivery. The FPA has also recommended how ASIC could encourage the digital delivery of advice using mobile technology.
We also believe improvements to a sample SoA could include a visual representation of a digital financial plan. As the FPA has also recommended, we suggest the use of visual elements; graphics, audio and video to make a more engaging delivery of information to consumers.
Our firm has amassed great understanding of the positives and pitfalls of digital automated advice. Our mission is to help all Australians to benefit from positive, trusted and compliant financial outcomes delivered by financial advisers who are supported and enabled by best of breed digital tools.
At a.i., we believe we can help to deepen the understanding of financial advice and to inform a best practice standard that helps drive better outcomes for all Australians. We’re happy to work with ASIC to share our knowledge and enhance consumers’ understanding of financial advice.
We are happy to work with ASIC on further consultation around the sample SoA and on how our future digital and interactive SoAs will be more suited to meet consumers’ needs.