What Is A Statement Of Advice

What is a statement of advice? It’s a term that you may have some familiarity with , but I wanted to start the post with a concrete definition.

This definition is from MoneySmarts site:

“A document that sets out the advice given to a consumer by their licensed financial planner or adviser. It must include the basis on which the advice is given, details of the providing entity, and information on any payments or benefits the adviser or licensee will receive.”

Let’s break this down into something a bit more manageable 

The first key thing to note here is that it must be written down. It cannot be a verbal recommendation or discussion. The conversation might initially start that way but the end outcome should be some form of written document. 

The next part is that they must be a “licensed financial planner or adviser”. This means they must have an Australian Financial Services Licence (AFS) and should be able to present it to you upon request. If they cannot, stop the consultation process. 

Moving on, the next section is “it must include the basis on which the advice is given, details of the providing entity”. In laymen's terms, this means they must explain why they are giving you the advice and how they have come to that conclusion. The next part refers to the details of the company or service provider they are recommending. 

The final part is crucial: “information on any payments or benefits the adviser or licensee will receive” You need to know how they are getting paid. Are you paying the bill? If so, is it a one off cost, a monthly fee or a percentage of the profits you make? If it’s the company or service paying the fee to the advisor, the you may want to question further.

What can you get a SOA for?

This is a sample information from a SOA from the ASIC website:

You can find the rest of the sample here

At a high level it covers:

• Details of the financial advisor

• Clients reasons for seeking advice

• Scope agreed

• What advice is not covered

• Overview of recommendations

• Current clients situation

• Comparison between various financial products

• Important things to consider when making the decision

• Any fees that would be involved

Some example financial products it covers are:

• Insurance such as TPD, Life and Critical illness cover

• Superannuation

• Wills and Power Of Attorney (POA)

• Investment advice

How much does a SOA cost?

There can be costs associated with the one of SOA as well as ongoing costs going forward so make sure you’re aware of these. 

The example from the MoneySmart website is pretty eye watering:

https://moneysmart.gov.au/financial-advice/financial-advice-costs

Also if Rhett’s situation significantly changes, he would require another SOA based on his updated situation. 

Given The Expense, What’s The Alternative?

So what’s the alternative to spending $13k on a single SOA? The alternative is educating yourself. I offer investment courses at a significantly cheaper rate than a SOA and the great part is that you’ve gained this knowledge for a lifetime. If you’re interested, book in a free 15 minute consultation to discuss your position. 

To be clear, there may be some genuine circumstances where you will require a SOA from a financial advisor but in others, investing in your own education is worth considering. 

Wrapping Up

Now you have a detailed knowledge of what SOA offers, some example costs and potential alternatives to a SOA. So weighing up all the facts, what's your next step? Do you have some areas in your financial life where you need some expert advice or do you want to kick off your financial education path? I look forward to hearing from you. 

Disclaimer

None of  the content is intended to provide you with personal financial advice. Information provided is factual and educational in nature for you to apply at your own discretion. 

You may wish to seek independent financial advice from a professional advisor for advice pertaining to your specific situation.