In our experience, one of the trickiest areas for advisers is knowing what to leave out of a SOA. This has been a problem since SOAs were first written into the legislation in 2001. In those early days, it was not uncommon for SOAs to run to more than 100 pages, with advisers (actually, more culpably, their AFSLs) insisting that the SOA include everything that could potentially be relevant, including things that would only ever be relevant on the fifth Friday in February.
We still see some confusion here. We are actually pretty sympathetic about this, because advisers are simultaneously told to disclose everything that is relevant but to be concise about it as well. To minimise the confusion, it is worth revisiting ASIC RG 175, which states:
Clear, concise and effective presentation of SOAs promotes understanding of advice by retail investors. We consider that the presentation requirements are as important as the content requirements in preparing an SOA.
- contain all key information in the body of the document instead of relegating some key information to an appendix;
- be tailored to the client and so not contain any irrelevant information such as generic research or educational materials that are not relevant to the SOA (this information can be made separately available to retail investors on request); and
- avoid repetition of content (so as to avoid adding unnecessary length to the SOA) by using clear cross-referencing
Bullet point (b) is particularly good guidance here. It clearly states that SOAs should not contain any irrelevant information. The SOA should contain advice and its basis only. Any additional information should be included separately.
For example, many advisers like the concept that underpins index funds. But the SOA is not the place to include the academic research that underpins the concept (which is rather dense and just as lengthy). If you, as an adviser, want your clients to understand index funds as a concept, then give this information as a separate document, not as part of your advice. In the SOA, restrict what you write to a recommendation of a particular fund, with a hyperlink (or, if your client is old-fashioned, a reference to a separate PDS for the fund) to the PDS. The PDS contains everything that the law requires a client to be told before purchasing a financial product. So, by clearly stating the recommendation in the SOA, and then ensuring that the client has access to the PDS for that product, you have met your compliance obligations.