Padding out the front of the SOA

It is not uncommon for us to come across SOAs in which nothing is said until page 6 or 7. Before that, the SOA is full of inappropriately long and numerous frontispieces, executive summaries, indexes and up-front disclaimers.

This padding, which is typically designed to make a document look more ‘weighty’ by extending its length and including financial jargon, actually detracts from the SOA. What’s more, it breaches ASIC’s requirement for clear, concise and effective disclosure under sub-sections s947B and 947C of the Corporations Act.

In our opinion, it is best to simply ‘jump-in’ on page one (page two at a push) with the real content of the SOA. Remember, you will have met your client and explained the advice to them. The statement of advice is almost like a transcript of your advice: it is not a book and it does not really need a narrative.

We also think the ‘legal bits’ of the SOA do better when they follow the actual advice. On one particular occasion, we read an SOA in which (literally) the first word was ‘WARNING.’ While s 961H of the Corporations Act 2001 (Cth) does require that clients be warned in certain situations (such as where the advice has been prepared based on incomplete information), that warning should not be the first thing that the client sees when they look at the SOA. And there is nothing in the legislation obliging the misuse of capital letters.

Far better, we think, to commence directly by telling the client the positive things that you are advising them to do. Start with a summary of their financial situation. This should be ‘section 1’ of the advice and would rarely run to more than one page. Section 2 would then include the actual advice. Section 3 might include all the costs and fees associated with the advice (this might actually be included in a section 2), with a final section containing licencing information and other necessary disclosures.

It is unlikely that a SOA would be long enough to warrant an index or table of contents. Some advisers like to use a front page on which they include the title ‘Statement of Advice,’ the client’s name and contact details for the adviser and Dover. These are fine. But if you find yourself getting to page 3 or beyond before your start telling your client what your advice is, you have probably said too much. While also having not said anything much. Time to start again.

The Dover Group