A greater understanding of what a financial service is and the differences between general and personal advice is necessary and will benefit advice businesses, according to an industry legal services firm.
Advisers should go “back to basics” in the way they think about how they can service clients, Gold Seal Legal director and solicitor Claire Wivell Plater told InvestorDaily.
“If they understand the difference between factual information, general advice and personal advice, there is a lot of potential for them to restructure the way that they provide services to be more cost-effective to them, for their clients and make the practice more efficient.
“A lot of planners have a tendency to worry that if they don’t give holistic, personal advice that they’re not sufficiently servicing the client’s needs but not all clients require a full financial service.”
She said if advisers provide factual information, no advice has been given and therefore no RG146 qualification is required, nor a financial services guide or statement of advice (SOA).
However the challenge for advisers is being confident about the boundaries of advice levels and managing client expectations, Wivell Plater said.
“[They must] be able to explain and agree with the client what services they are providing so that the client and the adviser are both clear about what the client wants and needs and what the adviser is providing.”
In addition, SOAs are another area where increased efficiency can be achieved.
“They could significantly streamline the time, cost and production of SOAs and their usefulness to the client,” Wivell Plater said.
However, there is a general lack of understanding of what is required in an SOA and advisers are afraid to exclude information that isn’t necessary.
“In fact, we often see a lot of things in SOAs that aren’t required but advisers leave out information that is required, particularly when they’re recommending that a client replace product,” she said.
She said educational or explanatory material, especially if it is generic and irrelevant to the advice being given, needs to be removed from SOAs.
Minter Ellison partner Richard Batten said with the introduction of the best interest duty, all advice firms need to reconsider how obligations are being met in their current advice model.
“That may well lead to restructuring advice models in particular contexts whereby you might decide to try to avoid giving personal advice where you would currently be prepared to and try to move down the scale to a more general advice model,” Batten said.
“To scale back what you are doing, that would require going back to basics with advisers.”
