How important are SOAs when it comes to advice compliance?
Source Of News
By Joel Ronchi, CEO, February 2023
At Fourth Line, we have reviewed in excess of 10,000 pieces of advice over the last 4 years.
How does Fourth Line work?
The Fourth Line advice assurance process reviews the advice process followed by the adviser to formulate the advice, which involves analyses of the core documents used in the process such as the Fact Find, Risk Profile Tool, File Note/s, and the SOA.
From our experience, many of the issues raised by the Fourth Line Advice Review Reports are related to the evidence presented by the adviser by way of insufficient fact-finding, lacking file notes, or incongruence between these documents and the information in the SOA.
How much importance is placed on the SOA?
The SOA is not proof of advice compliance, it is simply one tool in the overall advice creation and delivery process.
The advice process is how a financial adviser proves the advice and product selection are appropriate and in the best interest of the client. The SOA is simply the culmination of the process the adviser has followed to create the evidence that the advice is appropriate and in the best interest of the client.
Within the Fourth Line platform, we have incorporated learnings from AFCA/FOS determinations. The reason this is important is supported by AFCA advice ombudsman Shail Singh when he says (see article), “… the objectives laid out by the client is important and that long SOAs do not add any assurance on the quality of the advice given. Informed consent continues to be a big theme of someone understanding exactly what the advice is. Is there a conflict of interest.”
This is why, in many cases, file notes and the record of all the client conversations are more valuable that the SOA itself.
This is also where Fourth Line sees the biggest number of flags and concerns raised through the 10,000 SOAs reviewed over hte last 4 years.
The Fourth Line system identifies risks because of a lack of supporting evidence or information throughout the advice creation process. In line with Allison Dummett’s comments (in the article) that file notes (should) tell the story and not the SOA because as she mentioned, “So much happens outside the SOA. File notes are so much more important today than they ever were.”
Often, issues identified by Fourth Line are because there is a lack of continuity or accuracy in the story being told from the Fact Find to the File Notes and ultimately the SOA.
There is no doubt the SOA structure of today can be done away with in favour of a more succinct Record or Letter of Advice, but it is important in light of the QAR report that the industry continues to emphasise the importance of record keeping and the ability of the advice to tell the story of how the advice and product recommendations align with the client’s best interest and are appropriate for the client.
Fourth Line is a rigorous RegTech risk management and compliance system for advice practices, dealer groups and other wealth management participants. Fourth Line uses algorithmic approaches to simplify the complexity in advice reviews whilst maintaining human oversight, empowering compliance teams to coach and develop strong advice behaviors through data driven insights from advanced analytics for adviser, practice/dealer group and industry benchmark comparison with centralised document storage and access to meet regulatory needs.
For information email: email@example.com