Sanity Check: A Statement Of Advice should be a “statement”
Advice Processes & Best Practice Advice & Compliance & Financial Advice

Sanity Check: A Statement Of Advice should be a "statement"

September 8, 2017

by Tony Vidler  CFP logo   CLU logo  ChFC logo


When it comes to providing advice in writing to a client there is undoubtedly unnecessary complexity.  In fact the proverbial “Statement Of Advice” has become anything but a “statement”.  It generally takes the form of a tome…


A “tome is a scholarly work…usually large, heavy and laborious in its detail.

A “statement” is a declarative position.


So let’s get some sanity back into best practice advice processes.  I will put it out there – just my own humble opinion of course – but generally speaking the format of written advice being created for consumers today by financial advisers is anything but helpful.


It is a barrier to consumer engagement.

It is not actually designed for the consumer at all.  It is designed to protect everyone but the consumer.

The process has been captured by the fringe-dwellers.


Outrageous claim?  I don’t think so.


Let’s begin by going back to what it is supposed to be.


Whether the written advice is called a “record of client advice”, a “financial plan”, “statement of recommendations” or whatever someone wants to label it, the objectives of it should be pretty straightforward:

  1. Provide clear and concise direction to the recipient
  2. Be effective as a form of communicating the advice
  3. Provide sufficient rationale to justify the suitability of the advice


So how the hell has this concept of providing professional advice in writing to a consumer turned into 45-80 page monstrosities of disclaimers, pie charts, product fact sheets and research house spiels?


More importantly; how does anyone expect the average time-poor consumer to find this “engaging” or helpful?


You can’t blame the regulators or politicians for that (at least not in this country).  Actually the powers-that-be here made it pretty clear what their expectations were:

“Communicating ‘effectively’ for the purposes of the Code requires an (adviser) to take reasonable steps to ensure the client understands the communication.”


“The extent of any explanation required under this Code Standard is determined by what a retail client would reasonably require in the circumstances to make an informed decision, including:

(a) sufficient information to enable the client to make an informed decision as to the suitability of the financial adviser service provided by the AFA, and

(b) a concise description of the principal benefits and principal risks relevant to any financial advice provided as part of the AFA’s financial adviser services, having regard to the characteristics of those services.”


Better yet, the regulators left it to industry to best determine what form and shape that written advice could take.  The regulatory objective was pretty straightforward:  Make it useful; make it concise; and put it in writing.  Stand behind your advice…but deliver good advice.


Big tick to the regulators.


Consumers in the main haven’t asked for a tome when engaging with an adviser.  Sure, the occasional engineer client might ask for a lot of research and technical data, but most consumers don’t.  And if a particular client wants loads of technical detail by all means give it to them….but we should not be force-feeding every consumer with the same depth of data if it merely creates disengagement or confusion.


Most advisers don’t seem to want to produce 40+ page reports either as far as I can tell.


So a quick recap to this point:  Regulators don’t want a tome produced.  Most consumers don’t want a tome delivered.  Most advisers don’t want to be producing a tome.


So who does want this?


The people not actually involved in the creation, delivery, monitoring or implementation of financial advice.


The fringe-dwellers.  The non-advisers, and non-consumers, and non-regulators are the ones who created this mindset. Fundamentally it comes down to this: the more complex they can make the process the more we think we need them.  The more valuable they must be therefore because of the increasing complexity in our professional lives.


It is time to push back on the nonsense in my view, and get back to delivering what the paying customers want: Concise and effective advice that helps them make good decisions which lead to a better financial future.


If we – the advisory community – actually really cared about creating valuable advice which consumers could use and then wanted to engage with we’d set ourselves some really tough objectives.  Producing 40 pages of re-printed rubbish is not tough: distilling that into 4 pages of meaningful and personally relevant advice is though.


A great Statement of advice should be probably no more than 4 pages if you think about it.

  • One page actually saying what the recommendations are.
  • Another page saying what the risks or limitations or conflicts are.  You can fit that on one page if you strip out the legal guff and be blunt.
  • Another page saying why this is the right course of action in your professional opinion.
  • Perhaps a final page outlining the action plan, or next steps, once the advice is followed.


That’s it.


What else did the consumer want?


Actually; what else did the professional adviser want to produce for that matter?  And what else did the regulator want to see?


Let’s cut the crap out of clients lives and get some sanity back into the process of being professional.  Make the Statement Of Advice a “statement” again.  I daresay more consumers will be able to follow it, and more will want to follow it, and more consumers engaging with good professional advice because they can understand it was what the entire process was about to begin with.


We should be doing that.


You might also be interested in this related article:

How MUCH You Know Is Not That Important…
Get financial adviser coach blog updates via email.
Enter your email address to follow this blog and receive notifications of new posts by email.
Join 315 other followers

Facebook: 2831, Twitter: 13061, LinkedIn: 689

Follow tonyvidler on

Comments (4)

Leave a Reply