The Problem With SoAs

Advisers should take great care when using Statement of Advice ‘sausage machine’ templates, according to Catalyst Compliance Principal, Steve Murray.

Speaking to advisers at this year’s risk store Forum, Mr Murray was critical of the habits many advisers have developed as a result of relying too much on SoA templates, observing that most SoA’s he sees tend to contain ‘generic waffle’ that offer little or no value to the client or observe the purpose of SoAs in the first place.

In a ‘back to basics’ approach to creating Statements of Advice, Mr Murray referred to an extract from RG 175 that says what is expected to be included in SoAs:

1. The advice
2. The reasoning that led to the advice
3. Any conflicts that may affect the advice

Based on his extensive experience in working with advisers across many different firms, Mr Murray says it is point 2 above, the reasoning that leads to the advice, where advisers are weak, and that SoA ‘sausage machine’ templates contribute to this problem.

According to Mr Murray, while there are valuable efficiencies that can be gained by utilising SoA software, it can and does lead many advisers into the habit of just punching in numbers and churning out a result that is supposed to meet the client’s needs and be FSR compliant.

Mr Murray categorises much of the output from SoA software as being generic, weak and non-specific, often with no explanation as to exactly how the adviser has arrived at the advice provided and the cover levels and/or investment mixes recommended.

Mr Murray adds that good SoA’s observe compliance requirements that they be clear, concise and effective, three characteristics that are often lacking in the template-style SoA’s produced via software.

Good SoAs should be tailored to the client and no two should ever be the same, according to Mr Murray, unless the clients’ needs, circumstances and goals are identical.

A simple and key message to advisers from Mr Murray is to make SoA’s shorter (get to the point), clearly state the reasons why the recommendations have been made and remove all extraneous ‘fluff’ from the document.

Other suggestions and observations from Mr Murray  include:

• Make sure the SoA has a ‘use by’ date – many do not, but it is required
• Create a presentation style that actually includes the use of the SoA as a part of the selling process
• Develop a checklist to ensure that all relevant elements have been included in the SoA
• Ensure your detailed client knowledge does not stay in your head.  Make detailed notes, including how the client feels,and include this in the body of the SoA, if relevant to the advice being provided.
• Use the language of the client in the SoA, rather than industry jargon that is probably meaningless to the client
• The importance of detailing what advice is not provided, along with the advice that is
• Paint the picture for the client.  Tell the story, and in their words.
• Address the positive impact a claim benefit will have on a client and/or their family/business associates
• Remove all irrelevant generic information, including irrelevant product features (often too easily included in SoA’s generated by software templates
• If the recommendation is to retain existing products, that they still appear in the current approved product list of the dealer group licensee
• The importance and value of a second pair of eyes (a paraplanner?) for those advisers who usually create their own SoA’s

Mr Murray challenges advisers not to choose expediency over quality when it comes to producing their clients’ Statements of Advice.