FINS5537 financial services
financial services
Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: THEend8_
REGULATORY GUIDE 90
Example Statement of
Advice: Scaled advice for a
new client
About this guide
This guide is for Australian financial services (AFS) licensees, authorised
representatives and advisers who give personal advice to retail clients.
It explains how and why we have developed an example Statement of
Advice (SOA) for scaled advice (i.e. personal advice that is limited in scope)
on personal insurance for a new retail client.
The example SOA was developed in consultation with stakeholders, and we
acknowledge their valuable contribution throughout the process.
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
About ASIC regulatory documents
In administering legislation ASIC issues the following types of regulatory
documents.
Consultation papers: seek feedback from stakeholders on matters ASIC
is considering, such as proposed relief or proposed regulatory guidance.
Regulatory guides: give guidance to regulated entities by:
explaining when and how ASIC will exercise specific powers under
legislation (primarily the Corporations Act)
explaining how ASIC interprets the law
describing the principles underlying ASIC’s approach
giving practical guidance (e.g. describing the steps of a process such
as applying for a licence or giving practical examples of how regulated
entities may decide to meet their obligations).
Information sheets: provide concise guidance on a specific process or
compliance issue or an overview of detailed guidance.
Reports: describe ASIC compliance or relief activity or the results of a
research project.
Document history
This guide was issued in December 2017 and is based on legislation and
regulations as at the date of issue.
Previous versions:
Superseded Regulatory Guide 90, issued August 2013
Superseded guide Example Statement of Advice (SOA) for a limited
financial advice scenario for a new client, issued August 2005,
rebadged as a regulatory guide 5 July 2007
Disclaimer
This guide does not constitute legal advice. We encourage you to seek your
own professional advice to find out how the Corporations Act and other
applicable laws apply to you, as it is your responsibility to determine your
obligations.
Examples in this guide are purely for illustration; they are not exhaustive and
are not intended to impose or imply particular rules or requirements.
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
A Overview
Key points
The focus of this guide is the example Statement of Advice (SOA) in
Appendix 2.
The example SOA is based on a hypothetical limited financial advice
scenario for personal insurance. It illustrates how an adviser can produce a
compliant SOA that is concise, is structured in a way that is easy to follow
and is written in simple, plain language.
The example SOA has been developed in line with our increasing use of
behavioural research to understand regulatory problems. Our aim is to
provide guidance to help make SOAs more effective and easier for retail
clients to read and understand, as well as to assist advisers to make better
use of SOAs.
It is not designed to illustrate what we would consider to be the best advice
in this scenario.
Scope of this guide
RG 90.1 The focus of this guide is the example SOA in Appendix 2. This example
SOA is based on a hypothetical financial advice scenario described in
Appendix 1. The example SOA provides an example of scaled advice
(i.e. personal advice that is limited in scope) about personal insurance—
including life and total and permanent disability (TPD) cover, income
protection insurance and trauma insurance—for a new client.
Note: In this guide, we have used the term ‘client’ to refer to a ‘retail client’.
RG 90.2 This guide briefly sets out the aims of the example SOA, highlights the
various sections of the example SOA, and explains what these sections
contain and why.
RG 90.3 The example SOA illustrates how an adviser can produce a compliant SOA
that is clear, concise and effective. It is structured in a way that is easy to
follow and written in simple, plain language.
RG 90.4 The example SOA has been developed in line with our increasing use of
behavioural research to understand regulatory problems and, in some cases,
design and refine solutions for them.
RG 90.5 We designed the example SOA based on what we think is good disclosure
practice (not best disclosure practice) for an SOA dealing with such a
financial advice scenario.
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
RG 90.6 While the example SOA has been prepared for a personal insurance advice
scenario, we have tried to create an example that can be adapted to other
financial advice scenarios. We therefore encourage advisers to use the
example SOA as a model for other SOAs.
RG 90.7 We suggest that advisers consider the style, content and layout of the
example SOA in light of the particular SOA they are producing. We
recognise that the style, content, layout and length of an SOA will vary
depending on various matters, including the scope and complexity of the
advice. The example SOA is not intended to be used as a template, so it is
unlikely that an adviser could use it without modification.
RG 90.8 You may reproduce all or any part of the example SOA, in hard copy and/or
in electronic format, without asking for permission from ASIC.
RG 90.9 For further example SOAs, see the appendix to Regulatory Guide 244
Giving information, general advice and scaled advice (RG 244). The
examples in RG 244 are designed to illustrate the differences between giving
factual information, general advice and scaled advice.
RG 90.10 Our general approach to compliance with the SOA requirements is set out in
Section D of Regulatory Guide 175 Licensing: Financial product advisers—
Conduct and disclosure (RG 175).
RG 90.11 Regulatory Guide 221 Facilitating digital financial services disclosures
(RG 221) explains our approach to facilitating digital disclosure. We
encourage advisers to explore more innovative forms of disclosure and,
where advisers are concerned that there are remaining regulatory barriers, we
are open to granting individual relief to facilitate the use of these kinds of
disclosure where they are consistent with our Good Disclosure Principles set
out in Section C of Regulatory Guide 168 Disclosure: Product Disclosure
Statements (and other disclosure obligations) (RG 168).
RG 90.12 We have also provided—in the appendix to Report 413 Review of retail life
insurance advice (REP 413)—a checklist of matters that advisers should
consider when giving life insurance advice. This checklist includes guidance
about how to communicate the advice in an SOA.
RG 90.13 We will continue to assess SOAs against the existing law and our current
guidance. The example SOA is an illustrative aid. As stated above, we
encourage advisers to consider it as a model when preparing their own
SOAs. However, we do not intend to assess any SOAs against the example
SOA in a compliance review.
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
Aims of the example SOA
RG 90.14 The purpose of an SOA is to communicate to the client important and
relevant information about the advice being provided to enable the client to
make an informed decision about whether to act on the advice.
RG 90.15 Section B of this guide sets out the legislative requirements that apply to
SOAs, and what we think should be included in an SOA to enable a client to
make an informed decision about whether to act on the advice.
RG 90.16 The example SOA and this guide are underpinned by our current guidance
on SOA requirements, including the requirement for clear, concise and
effective disclosure. The design of the example SOA has also been based on
insights from behavioural research into how people find and understand the
information in SOAs. The language, structure, content and length of the
example SOA are designed to make it a relatively simple and effective
communication tool.
RG 90.17 We have developed the example SOA as a communication tool that sets out
and explains the advice. It has not been designed for use as:
(a) a compliance tool;
(b) a mechanism to protect the providing entity against liability;
Note: A ‘providing entity’ is the person to whom the obligations in Pt 7.7 of the
Corporations Act 2001 (Corporations Act) apply. This is the Australian financial
services (AFS) licensee or authorised representative that provides the financial product
advice.
(c) a complete record of all information that you would expect to find in the
client file (i.e. the information kept about the advice provided to the
client); or
(d) a place to include additional information not required by law
(e.g. educational material, which may be attached or provided
separately).
RG 90.18 The example SOA also provides an example of scaled advice. It demonstrates
how an adviser can clearly communicate the scope of such advice. For more
guidance about giving scaled advice, see RG 244.
RG 90.19 We developed the example SOA on the basis that the adviser in our financial
advice scenario is maintaining information on a client file, and that this file
shows that the adviser has met the best interests duty and related obligations
in Div 2 of Pt 7.7A of the Corporations Act.
Note: See RG 90.37–RG 90.39 for a description of the record-keeping obligations that
apply when giving personal advice to clients.
RG 90.20 Clients and their advisers will discuss a broad range of matters over the
course of their relationship. While these matters may provide context and
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
background for the advice, not all this information should be in the SOA.
Information can be communicated to the client in other ways: see RG 90.43.
Design and structure of the example SOA
RG 90.21 Section C of this guide explains in detail the design and structure of the
example SOA. We describe what each section of the example SOA contains
and explain why this information has been included. Table 1 summarises the
sections included in the example SOA.
Table 1: Key sections of the example SOA
Section Purpose
Front cover The front cover sets out basic information—such as the name of the adviser and
their contact details—that the clients need to know before they read the contents
of the SOA. It explains what the SOA is about, and why clients should read it.
Table of contents The table of contents helps clients navigate the document. We consider a table of
contents to be particularly useful if an SOA is more than 10 pages long.
Summary of my
insurance
recommendations and
commissions
This section provides an overview of the adviser’s recommended insurance
products and commissions. It refers clients to key sections of the SOA for more
information about these topics.
Note: The SOA should also disclose any fees or costs associated with the advice and,
if these apply, this should be reflected in the heading to this section.
What you want This section outlines the adviser’s understanding of the clients’ insurance
preferences and needs.
What you should know
about my advice
This section sets out the limits on the advice (i.e. the scope) and other key
information the clients need to know about the advice.
About you: Brad and
Zara
This section summarises details from the clients’ personal and financial profile,
which the adviser has gathered to understand their needs and what is required to
meet those needs.
My advice This section sets out the adviser’s recommendations for meeting the clients’
needs, as identified in the ‘What you want’ section.
Reasons for my
recommendations
This section explains why the advice is in the clients’ best interests and is
appropriate in light of their financial circumstances and objectives.
Consequences of my
advice
This section sets out the financial consequences and risks of the advice.
How to follow my
advice
This section outlines the steps the clients need to take if they wish to follow the
advice.
My commissions This section sets out any commissions the adviser and their AFS licensee would
receive if the clients decide to act on the advice.
Note: If there are any fees or costs associated with the advice, this should be made
clear in the heading to this section.
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
Section Purpose
Authority to proceed It is generally industry practice to include some kind of document giving the
adviser an ‘authority’ to proceed with the advice. We have included this authority,
together with a checklist of important things the clients should make sure they
have done before acting on the advice.
RG 90.22 The last part of Section C of this guide sets out what is not included in the
example SOA and why. The types of information we have not included are:
(a) disclaimers and warnings;
(b) financial product information;
(c) financial services provided; and
(d) additional information not material to the advice or the basis of the
advice.
Financial advice scenario
RG 90.23 We have designed the example SOA based on a hypothetical and limited
financial advice scenario for personal insurance (i.e. one that does not
require a full financial plan).
RG 90.24 The advice scenario deals with Brad and Zara—a married couple with two
young children—who have asked a financial planner, Sally Chong, to advise
them on personal insurance cover in the event of death or disability, taking
into account their current income and assets. This scenario is set out in more
detail in Appendix 1.
RG 90.25 The advice we developed is one of a number of possible outcomes. While
we have tried to ensure that the financial advice scenario is as realistic as
possible, we recognise that there might be disagreement with some aspects
of the scenario. The example SOA in Appendix 2 is not designed to illustrate
what we would consider to be the best advice in this scenario.
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
B Aims of the example SOA
Key points
The example SOA, together with this guidance, is intended to help advisers
produce a relatively simple and effective SOA that complies with the SOA
requirements in Pt 7.7 of the Corporations Act.
This section sets out the relevant legislative requirements, and provides a
brief overview of how the best interests duty affects the content of SOAs: see
RG 90.29–RG 90.31.
In preparing an SOA, we consider that the presentation requirements
(i.e. structure, layout and language) are as important as the content
requirements. This is why we have used insights from behavioural research to
improve the way our example SOA communicates information to clients.
It is particularly important to ensure that SOAs are not too long or complicated
because this detracts from client understanding. Although an adviser is likely
to consider and discuss a broad range of matters with the client, not all this
information needs to be in the SOA: see RG 90.40–RG 90.43.
Legislative requirements
RG 90.26 We consider that the example SOA will help advisers comply with the SOA
requirements in Pt 7.7 of the Corporations Act.
RG 90.27 Under s947B, 947C and 947D, an SOA must contain:
(a) a statement setting out the advice (see s947B(2)(a) and 947C(2)(a));
(b) information about the basis on which the advice is or was given (see
s947B(2)(b) and 947C(2)(b));
(c) a statement setting out the name and contact details of the providing
entity and, where relevant, the authorising AFS licensee (see
s947B(2)(c) and 947C(2)(c)–(d));
(d) information about remuneration, commissions and other benefits
capable of influencing the providing entity in providing the advice (see
s947B(2)(d) and 947C(2)(e));
(e) information about any other interests, associations or relationships that
might be expected to be or have been capable of influencing the
providing entity in providing the advice (see s947B(2)(e) and
947C(2)(f));
(f) where the personal advice is based on incomplete or inaccurate
information, a statement setting out the warning required by s961H (see
s947B(2)(f)) and 947C(2)(g)); and
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
(g) where the personal advice recommends the replacement of one financial
product with another financial product (also known as ‘switching
advice’), the additional information required by s947D.
Note: Under s947B(2)(g) and 947C(2)(h), an SOA must also contain any other
statements or information required by the Corporations Regulations 2001 (Corporations
Regulations). Currently, there are no requirements other than those specified above.
RG 90.28 These requirements are subject to two general limitations, as set out in Table 2.
Table 2: General limitations on the SOA requirements
Limitation Description
Level of detail The level of detail for each matter is generally what a
person as a retail client would reasonably require to make
a decision about whether to act on the advice: see
s947B(3) and 947C(3).
Clear, concise and
effective
The statements and information in an SOA must be worded
and presented in a clear, concise and effective manner:
see s947B(6) and 947C(6).
Note: For guidance on clear, concise and effective
disclosure, see RG 175.203–RG 175.207 in RG 175.
RG 90.29 Part 7.7A of the Corporations Act contains a series of obligations that
financial advisers must meet in providing advice. These are designed to
reduce conflicts of interest and ensure the adviser gives priority to their
clients’ interests and provides advice of sufficient quality.
RG 90.30 Under Div 2 of Pt 7.7A, financial advisers must comply with a best interests
duty when providing personal advice to clients. This duty requires advisers
to act in the best interests of their clients and to place the interests of their
clients ahead of their own: see s961B(1) and 961J(1).
RG 90.31 An adviser is deemed to have satisfied the best interests duty in s961B(1) if
they can prove they have taken the steps set out in s961B(2)—referred to in
RG 175 as the ‘safe harbour’. One way for an adviser to demonstrate they
have satisfied the best interests duty is to ensure that the client file reflects
that the adviser has taken these ‘safe harbour’ steps. However, this is not the
only way an adviser may demonstrate they have acted in the best interests of
a client.
Note: See Section E of RG 175 for more guidance on our expectations for complying
with the best interests duty and related obligations.
Purpose of an SOA
RG 90.32 The purpose of an SOA is to communicate to the client important and
relevant information about the advice so they can make an informed decision
about whether to act on the advice. The example SOA and this guide are
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
underpinned by our current guidance on the SOA requirements, including
the requirement for clear, concise and effective disclosure. The design of the
example SOA has also been influenced by behavioural insights and primary
research on how people find and use information in SOAs.
Note: See Section D of RG 175 and the Good Disclosure Principles in Section C of
RG 168.
RG 90.33 As outlined in RG 175, we consider that an SOA should clearly, concisely
and effectively summarise, for the benefit of the client:
(a) the advice;
(b) the reasoning that led to the advice, including:
(i) the subject matter of the advice sought by the client;
(ii) the scope of the advice;
(iii) a concise summary of the client’s relevant circumstances, as
ascertained after making the inquiries required by s961B;
(iv) a generic description of the range of financial products, classes of
financial product or strategies considered and investigated for the
purposes of s961B;
(v) an explanation of why the advice and recommendations were
considered appropriate, including in light of the alternative options
considered, and the advantages and disadvantages (including risks)
for the client if they follow the advice; and
(vi) an explanation of how the adviser has acted in the client’s best
interests. We consider that it is good practice to set out the basis on
which a reasonable adviser would believe that the advice is likely
to leave the client in a better position if the client follows the
advice.
Note: For further guidance on preparing and providing an SOA, see Section D of RG 175.
RG 90.34 Consistent with this purpose, we have developed the example SOA as a
communication tool that sets out and explains the advice. It has not been
designed for use as:
(a) a compliance tool;
(b) a mechanism to protect the providing entity against liability;
(c) a complete record of all the information that you would expect to find in
the client file (i.e. the information kept about the advice provided to the
client); or
(d) a place to include additional information not required by law
(e.g. educational material, which may be attached or provided separately).
Note 1: For more detail about the design of the SOA, see Section C of this guide. For
guidance on preparing and providing suitable personal advice, see Section B of RG 175
and Sections D–F of RG 244. For guidance on including additional information in an
SOA, and the clear, concise and effective disclosure requirement, see RG 175.203–
RG 175.207 of RG 175.
REGULATORY GUIDE 90: Example Statement of Advice: Scaled advice for a new client
RG 90.35 We have developed the example SOA on the basis that the adviser in our
financial advice scenario is maintaining information on a client file. This
client file should show the steps that the adviser has taken to satisfy the best
interests duty and related obligations in Div 2 of Pt 7.7A.
RG 90.36 We have not included in the example SOA all of the information that we
would usually expect to find in the client file. For instance, the example
SOA does not include information about the alternative financial products or
strategies that were considered but rejected by the adviser in providing the
advice. However, we would expect this information to be clearly set out in
the client file.