What is a Statement of Advice?
In a nutshell, a Statement of Advice is a document that clearly outlines the recommendations that have been made by the industry expert and also explains why these recommendations have been made. The Statement of Advice must be provided in accordance with the Financial Services Reform Act (2002). It should not only provide details of what has been recommended and why, but also details of how the recommendations and intended to benefit you.
You will find a range of information in a properly drawn up Statement of Advice. Ensure the following details are included:
- The name, address and contact details of the adviser or the company that has offered the advice
- Details about the advice that has been given
- The date that the advice was given
- The adviser's or company's Financial Services License Number
- The type of product that the advice relates to
- The recommendations that have been made and why they have been made
- Details of the benefits that the products/services recommended should provide
- The name of the insurer
- Details of your own instructions to the adviser
The adviser or company must provide you with a Statement of Advice in order to be compliant with regulations and in order to ensure that you are dealing with an adviser or company that is compliant there are a number of things you should look for with the Statement of Advice that you are given. This includes:
- Checking the document is official: Your document should have the words Statement of Advice at the beginning, so make sure you check this in order to ensure you have an official SOA
- Looking for justification of recommendations: You should make sure that the Statement of Advice you receive provides clear details on why the adviser or company has recommended a specific product or policy
- Ensuring there are details of product/service recommended: Your Statement of Advice should contain the details of the insurance company that has been recommended to you by the adviser along with details of the premiums that are payable on the policy
- Checking on commission disclosure: The SOA should provide details of any commission that will be received by the adviser or company in the event that you take the advice and decide to go with the service/plan recommended
- Ensuring there is an official licence number: You need to ensure that the Statement of Advice states the Australian Financial Services Licence number of the adviser
Why is a Statement of Advice required?
The Statement of Advice that you receive after getting official advice on insurance is important for a number of reasons. First off, it provides full and important details of the services and products that have been recommended, so you have a written summary of everything that has been discussed, as well as the reasons for recommendations, commission information and other important details. Also, a proper SOA with the licence number included helps to ensure that you are dealing with a compliant firm.
If you request personal advice on insurance only, you may receive an SOA only for limited advice (i.e. for your insurance). It is important to carefully read the Statement of Advice to ensure you fully understand how the adviser is remunerated and whether they have any relationships or associations that may influence their advice. The SOA will also outline any potential conflicts of interests in the provision of insurance recommendations.
Speak to a financial planner today to get your personalised SOA