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Small adviser documents ‘realistic’

Some streamlining of disclosure requirements might be useful but advisers are already able to put together small documents, according to Standard Set C assessor Angi Lambert.

Monday, January 14th 2013, 8:07AM 3 Comments

by Niko Kloeten

Authorised Financial Advisers have raised concerns about the lack of access to advice for low-end investors and have called for a simplified advice model in order to be able to provide advice to these clients without the full compliance burden of a personalised advice service.

Institute of Financial Advisers president Nigel Tate recently predicted regulatory changes that would allow advisers to more easily “scale” their advice. 

“Scaled advice doesn’t necessarily mean lower quality advice but it’s not so in-depth and doesn’t have to be a 20-page document; you can do four to five pages and make it a bit simpler,” he said.

Lambert said five-page disclosure documents are “realistic” even under the current regulatory settings, but how advisers get paid can have an impact on how long the documents end up.

“The biggest area that takes up the most room is disclosure of commission,” she said.  “If you have a simple remuneration structure such as a flat fee for service this won’t take as long to explain.”

She said there’s an element of “reality versus perception” in advisers’ complaints about the regulatory regime requiring huge amounts of paperwork.

Uncertainty about exactly what is required has caused some advisers to do too much, Lambert said. 

“I think advisers really really want to do the right thing and sometimes they are unsure of the expectations of the regulator in terms of what they are doing so they are choosing to do more so they don’t fall short of what their obligations are.”

Lambert said it’s not just sole practitioners who are being cautious; some of the big organisations with lots of lawyers are also producing hefty disclosure documents.

“Lawyers do like to put lots of clauses and disclaimers in,” she said.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 14 January 2013 at 2:01 pm richard said:
I am sorry but what is the article talking about? Nigel Tate is talking about scaling advice ( I presume an SOA ) and Angi Lambert is talking about a 5 page disclosure document. Are they on the same page?
On 14 January 2013 at 3:27 pm brent sheather said:
I see Angi Lambert reviews standard set c, it would be good to know what her qualifications and industry experience are..i.e. what degrees and for whom did she work and how long. I'm sure she is eminently qualified but given the importance of standard set c,even allowing for the fact hardly anyone had to sit it,it would be good to see what her background is.
On 15 January 2013 at 10:08 am Dirty Harry said:
The uncertainty about the regulators' expectations was a deliberate strategy by the regulators as part of their push for practitioners not to just 'be compliant' but to strive to be better than that. The IFA overtly pursues the same objective.

That's not part of the problem this article addresses; it's a positive outcome.

I am pleased that the discussion is turning to how we the advisers can better manage how we understand, set, agree and then deliver on client's expectations, within the new regulated environment. If that means a 4-page letter of advice then deliver that.

If it means charging more, preparing a 20 page document full of research and calculations and comparisons then that's great too.

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