Not using a logical sequence in the SOA

Ensure your SOA has a logical sequence and makes sense as a document. The Financial Ombudsman Service (FOS) says in broad terms SOAs must have:

  1. a beginning, ie paragraphs stating the client’s objectives (be cautious here), time frame (must be at least ten years except in exceptional, and well documented, cases);
  2. a middle, ie paragraphs outlining the possible strategies and/or products that are likely to meet the client’s objectives; and
  3. an end, ie, paragraphs setting out recommended strategies and products.

(Source: FOS’s views on the adequacy of advice)

While on one level, stating that SOAs should have a beginning, a middle and an end is not that helpful, we can change this to say that, broadly speaking, an SOA should:

start with

  1. a description of the client’s situation including their aims and objectives, allowing the SOA to demonstrate that the adviser has complied with the requirement that they ‘know the client,’ a foundation element of the s 961B obligation to act in the client’s best interests;

followed by

  1. a description of the strategies and products that have been contemplated for the particular client, allowing the adviser to satisfy their obligation to provide advice that suits the client’s circumstances and the ‘know the product’ rule (another foundation element of the s 961B obligation to act in the client’s best interests);

before concluding with

  1. the advice, including the fees payable by the client and amounts receivable by the adviser, and directions as to how the client can commence the implementation of the advice;

SOAs that present the material in any other order than this run the risk of the SOA, as a whole, not making sense. Some SOAs start with an executive summary that includes a description of the advice. This is fine (although perhaps unnecessary), as long as it is followed by the steps as outlined above.

The Dover Group