Scoping a major SOA problem

A legal firm partner has identified scoping as one of the major elements contributing to erroneous statements of advice (SOA) issued by financial advisers.

Speaking at last week’s SMSF Association National Conference 2018 in Sydney, Holley Nethercote Commercial and Financial Services Lawyers partner Paul Derham told delegates: “Scoping is what we call it and it’s actually answering the question: What are you being asked to do?

“We see lots of advisers who are so expert in their field, they know their product so well, that they will put their recommendation in the scope.

“So [for example, they would document] ‘you have asked for us to help you roll [your funds] over into the BT Wrap’, whereas the client actually said ‘can you look at my super’.”

According to Derham, this situation has created a lot of confusion about what the scope of a piece of financial advice actually is.

He pinpointed “boilerplate” goals and objectives as another problematic area when examining SOAs.

“[That means] generating that statement of advice through your software so the goals and objectives for the client that met you today happen to be extremely similar to 90 per cent of your other clients,” he said.

“So not taking the time to tailor the client’s goals and objectives.”

SOAs covering off advice pertaining to the switching of superannuation funds is a third area Derham nominated as causing many concerns for advisers.

The main problem in these instances stemmed from advisers not performing enough comparative work to properly compare the client’s current situation with how they would be placed if they became members of an alternative fund, he said.

“They’re not justifying the recommendation particularly around the insurance space [where] they’re not actually looking carefully enough at the existing insurance [cover].”

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