What is a Statement of Advice and do I need one?

Seeking professional financial advice may be a significant stepping stone to your financial success and freedom, and if you have been considering engaging with a financial adviser it is important to understand what you will receive as part of the service provided. The following article will outline the nature of the formal financial advice you will receive as well as the associated costs and benefits with a Statement of Advice.

What is a Statement of Advice?

A Statement of Advice or SOA is a formal document that outlines the recommendations a financial adviser is making for a particular client to help them to achieve their financial needs and objectives. Providing clients with an SOA is a legal requirement for all registered financial advisers with an Australian Financial Services License (AFSL). The purpose of this document is to assist retail clients to understand and make informed decisions pertaining to their personal financial circumstances.

Typically, an SOA must be provided to a retail client when personal advice is provided. However, an SOA does not need to be provided in the case of further advice on the condition that an SOA has previously been provided and has set out the client’s relevant circumstances. These further advice documents are called Records of Advice and usually provide advice in addition to the SOA where the client’s circumstances have not changed significantly.

What will I receive in a Statement of Advice?

An SOA must comply with the requirements of the Corporations Act and Regulations and must include:

  • Information of the providing entity such as the AFS licensee and license number
  • The statement setting out the advice
  • Information about the basis on which the advice is being given
  • Information about the remuneration, commission and other benefits that the providing entity will receive
  • Details of any interests, associations or relationships that may influence the provision of advice and
  • A warning which outlines the risks of advice based on incomplete or inaccurate information

The Corporation Regulations set out additional information about the requirements when providing advice. An SOA must disclose the particular advice being provided, the basis for the advice and include as much detail about a matter as a person would reasonably require to make a decision about whether they follow the advice as a retail client. There is a range of legislative requirements in place to ensure that financial advisers comply with the regulatory standards in place as well as to ensure consumers are protected. It must also include the reasoning that led to the advice including:

  • The subject matter of the advice that has been sought by the client
  • The scope of the advice
  • A summary of the client’s relevant circumstances
  • A generic description of the range of financial products or strategies considered and investigated in the course of ascertaining the correct recommendations
  • A concise statement containing the reasons why the advice and recommendations were considered appropriate including the alternatives that were considered
  • The advantage and disadvantages if the client follows the advice and how the providing entity has acted in the client’s best interests

Depending upon the advice you are seeking and your current financial and personal circumstances, your SOA may include cash flow, debt, superannuation, estate planning, insurance, social security, and/or investment advice. The advice provided will be based on your individual needs and objectives over a short-, medium- and long-term basis, and should assist you to achieve these goals in their specified time frames.

How much does a Statement of Advice cost?

The cost of engaging with a financial adviser will vary depending on your financial position, the scopes of advice included as well the particular adviser you choose. When engaging with an adviser, they should provide you with their Financial Services Guide (FSG) which outlines their fees, services and the complaint resolution process. This guide enables clients to compare fees between different advisers and establish the appropriate course of action according to their needs.

An SOA has a one-off fee charged for the cost of preparing the document, it can either be paid upfront or deducted from your investments/super account. In November 2020, it was estimated that advisers need to charge an average of at least $3,500 for an SOA per client to cover the costs of producing the document, and the true cost of an SOA being around $6,500 in total. Clients are usually charged between $2,200 to $5,500+ depending on the complexity of the advice.

This is separate from an ongoing fee that you will be charged if you choose to have a continued relationship with your financial adviser. EPG Wealth charges a higher SOA fee upfront to provide the initial advice, however this is offset against the lower ongoing views. This is because fees are charged on a flat rate instead of on a percentage basis and therefore the fees do not increase in line with a rise in the value of your investment, super or pension account.

The more scopes of advice the adviser is providing recommendations on, the more complex the advice and therefore more reason for an adviser to increase the cost of an SOA. However, this must be understood and offset against the value of the advice which can have a significant impact on your financial success and freedom.

If you are contemplating obtaining financial advice or would like to begin your investment journey, please click the link to organise a complimentary 20-minute phone call with an EPG Wealth adviser.

This information is purely factual in nature. Please do not rely on this information to make any financial decisions as this information has not been tailored to your personal. circumstances. If you would like financial product advice or services please let me know and I will set up an appointment for you. Any advice in this email is of a general nature only and has not been tailored to your personal objectives, financial situation and needs. Before acting on this advice, you should consider whether it is appropriate having regards to your personal objectives, financial situation and needs. Before making a decision to acquire a financial product, you should obtain and read a Product Disclosure Statement (PDS) relating to that product, it is important for you to consider these matters and to seek appropriate advice. The material contained in this email is based on information received in good faith from third party sources, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Past performance is not a reliable guide to future returns. Members of the IOOF group of companies (IOOF Group), associated employees or agents may have an interest in or receive monetary or other benefits from the financial products and services mentioned in this email. The Licensee is part of the IOOF Group, and we may recommend financial products issued by companies within the IOOF
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