At the other end of the spectrum from the sophisticated investor is the small investor for whom the investment amount is insufficient to trigger a need for an SOA. This situation is explained by RG 175.146 (e), which states that an SOA is not required where the advice relates to financial investments whose value does not exceed $15,000.
The reason for doing away with the requirement for the SOA in this situation is quite clear: the time taken to prepare the SOA would result in a fee for the service that would require a substantial part of the amount to be invested to be instead spent on compliance. Proportionally, the small investor (who is presumably a person of comparatively little wealth) would be paying a higher percentage of their investment amount in fees than their more wealthy counterparts.
There is also the fact that the client has relatively little to lose where the amount invested is less than $15,000, again reducing the justification for expensive and time-consuming compliance.
Once again, however, there is nothing to stop an adviser preparing an SOA for a client whose investment is worth less than $15,000. Advisers who do so should ensure that their SOA ticks all the usual boxes with regard to compliance.
In the case of small investments, the adviser also needs to be aware that they will find it difficult to justify charging a fee for preparing an SOA, given that the SOA is not required by law. The fact that the client does not require an SOA does not alter the other legal obligations of the adviser, specifically that they act in the best interests of their clients at all times. An adviser charging what is likely to be a low-wealth client for unnecessary work leaves himself or herself open to an accusation of over-charging.
This is also a general point: the fact that an SOA is not required does not mean that the adviser can be negligent or otherwise cavalier in advising that client. The law will still protect even clients with little to invest. The fact that RG 175 does away with the need for an SOA for low-wealth clients is intended to benefit those clients, not their advisers. Don’t drop your game just because the amount is small.