Not setting out the scope of your advice

It is always a good idea to commence an SOA by stating quite clearly what the advice is intended to address. Interestingly, by doing this, not only do you state what the advice does address – you also state what the advice does not cover. Setting out the scope in this way is always a good idea – and is allowed by ASIC in 175.261:

An advice provider can determine the scope of the advice only after identifying the subject matter of the advice sought by the client.

Here is a great example of setting out the scope, taken from an actual SOA provided to a client (ignore the grammatical errors, which are retained for authenticity):

Executive summary

Scope of advice

This Statement of Advice has been prepared based on our recent discussions and the Fact Finder that we have completed. A copy of this has been emailed to you.

At this time you have asked us to provide advice on:

  • Investments
  • Superannuation
  • Personal Insurance
  • Cash Flow and Salary Packaging
  • Estate Planning

Your objectives

In terms of your financial goals, you have asked us to focus on the following objectives:

  • You would like to us to recommend a moderately conservative investment plan for your capital sum of $500,000
  • You want to learn how to manage your money efficiently
  • Your medium and long term goals are to move to a semi-rural location and to retire before the age of 65
  • We should review your salary packaging entitlements, super and insurance arrangements
  • And assist you with estate planning

This introduction very clearly states those types of financial product that it will address, and also provides a clear link to the objectives that these products will be used to address. Any reader will be immediately aware of the scope of the advice – which will also inform them of things that are not included in this scope.

All the adviser then needs to do is ensure that every item listed is in fact addressed within the advice. This is critical and we do see some examples where the advice starts off by listing every type of financial product, but then only actually addresses one or a few of them. This is a big mistake, as it makes it look as though the advice is actually incomplete, and therefore inadequate.

The Dover Group