Part D of ASIC’s RG 175 requires that SOAs be “clear, concise and effective”.
The Financial Ombudsman Service (FOS) observes that the phrase “clear, concise and effective” is not defined in the Corporations Act. It therefore recommends that these words be given their ‘natural’ meanings. (‘Natural’ is a legal term that means ‘what people usually think this word means’).
FOS then quotes the Macquarie Concise Dictionary as follows:
- “clear” means “plain”, and “free from obscurity … confusion, uncertainty or doubt”;
- “concise” means “brief and comprehensive, succinct, terse;
- “effective” means “producing the intended or expected result”.
FOS expects SOAs to be expressed in plain English, to be brief yet comprehensive and to promote understanding. You can read more about FOS’s views on SOAs here: FOS’s views on the adequacy of advice.
In many ways, the three criteria collapse into the last one (that the advice be effective). If writing is not clear and concise it will, almost by definition, be ineffective.
Effective means achieving the intended result. The intended result of the advice is to meet your disclosure obligations. That is, to ensure that your client has been told everything that they need to be told in order to understand what it is that you suggest they do with their money. Bear in mind: this implies that the disclosure has to be made in a way that clients – and the proverbial ‘reasonable person’ – can comprehend.
Years ago, a trusted mentor advised us to “write as if your mum is the audience.” While this advice might be somewhat dated, and would not make sense at all if your Mum was Mary Gaudron (Australia’s first female Justice of the High Court – amazingly, a woman who had to give up her public service job when she got married), what it really means is to write for a reader of normal intelligence but with no particular training in finance. That sounded like our Mum.
In our experience, advisers who apply this mindset and aim for effectiveness write the best SOAs.