December 8, 2017
ASIC has moved commissions off the front page of its example Statement of Advice (SoA) for life insurance, following industry feedback which claimed the numbers were being presented without context.
Under the new version of the example SoA, ASIC recommends commissions are listed as part of an executive summary of the advice provided, which appears after a cover page detailing the name of the adviser and clients, and a table of contents for the SoA.
A detailed breakdown on all fees and commissions should also appear at the back of the SoA before pages providing an Authority to Proceed, ASIC stated in the updated Regulatory Guide related to scaled advice for life insurance clients.
In a separate report covering the feedback ASIC received on the first example SoA, the regulator stated that “prominent, upfront disclosure does not necessarily mean that commissions need to appear on the front page”.
ASIC also stated that while consumers may notice the information on page one “…it may not lead them to understand it in the context of the advice or to critically engage with the advice itself” and it considered “…there is merit in the argument that commissions should be better contextualised”.
“…there is merit in the argument that commissions should be better contextualised”
According to the report, ASIC also removed some of the repetition of information that appeared in the first version of the example SoA. That work did not go as far as adviser feedback suggested and ASIC stated that advisers read SoAs differently than consumers and repetition would ensure the latter understand the contents of the SoA.
ASIC also removed any disclaimers designed to protect advisers from liability for the advice stating that information was more appropriate in a letter of engagement or Financial Services Guide, instead of an SoA which communicated the advice provided.
The new example SoA is the result of public consultation as well as a round table with representatives from the FSC, FPA and AFA, following the release of the first version of the example SoA in May (see: ASIC Releases New Sample SoA for Life Insurance).
Acting ASIC Chair, Peter Kell said the new example SoA had been designed to balance the interests of consumers with minimising regulatory burden on advisers.
“SoAs are a fundamental and important tool for an adviser to communicate their advice to the client,” Kell said, adding “We appreciate the feedback we received on the draft example SoA and have taken it on board in finalising the guidance.”