The Most Common SoA Compliance Mistakes Are Things That Are Missing

Ask a paraplanner what goes wrong in a Statement of Advice and you will usually hear about writing: a paragraph that rambles, a recommendation that is hard to follow, jargon a client will not understand. Those problems are real. They are rarely the ones that matter at review.

When we ran our compliance check over the specimen SoA we publish on this site, a realistic document for fictional clients, written the way a competent practice writes, the findings that mattered had something in common. None of them was a badly written sentence. Each was a sentence that was not there.

Why omissions survive review

A reviewer reading an SoA judges what is on the page. Is this paragraph accurate? Is that recommendation explained? Is the tone right for the client? Every question starts from text, and that is the trap. A requirement that was never addressed produces no text to judge. A reader moves smoothly past a gap, because a gap reads like a finished section that happens to be short.

The Corporations Act does not work that way. Section 947B(2) for a licensee, and section 947C(2) for an authorised representative, list the statements and information a Statement of Advice must include. Section 947D adds more when a product is replaced. These are lists of things that must be present, so a compliance problem is very often an item on one of those lists that is absent.

Four absences, from one well-written SoA

The alternatives, without the comparison. The specimen describes the alternatives to its recommendation, an SMSF, in reasonable detail. What it does not do is show, in dollars, why the SMSF is better for these clients than the platforms it was compared against. The check raised this against s961B(2)(e), the step that requires the provider to conduct a reasonable investigation into the financial products that might meet the client's relevant objectives and needs, and to assess what that investigation found. Describing options is not the same as showing the assessment. ASIC's review of advice files at vertically integrated institutions (REP 562, January 2018) named this as one of the two areas that most often led to a file being rated non-compliant: the adviser had not demonstrated that they had sufficiently researched and considered the customer's existing financial products.

A replacement that does not say what is lost. The specimen recommends rolling both clients out of their industry funds. Where advice recommends replacing one product with another, s947D(2)(a) requires the SoA to include, to the extent the information is known or could reasonably be found out, the charges on disposal, the charges on acquisition, and "any pecuniary or other benefits that the client will or may lose (temporarily or otherwise) as a result of taking the recommended action". The specimen covered the charges. It did not say what the clients would lose on rollover. If the adviser cannot find out what those losses are, s947D(3) still requires a statement that there will or may be such losses and that the adviser does not know what they are. Saying nothing is the one option the section does not allow.

A licensee left off the cover. The specimen's cover names the adviser. Where the adviser is an authorised representative, as here, s947C(2)(d) requires the SoA to set out the name and contact details of the authorising licensee and to state that the adviser is that licensee's authorised representative. The specimen's cover gave the adviser but not the licensee's phone or address. This is the cheapest finding on the list to fix and one of the easiest to miss, because the cover looks complete.

A conflicts register with nothing in it. The check compares an SoA against the firm's conflicts register, because s961J requires an adviser who knows, or reasonably ought to know, of a conflict between the client's interests and their own (or their licensee's, or an associate's) to give priority to the client's interests. On the specimen the register was empty, so there was nothing to check the advice against. An empty register is not evidence that there are no conflicts. It is indistinguishable from a register nobody keeps, and a licensee has its own duty under s912A(1)(aa) to have adequate arrangements for managing conflicts of interest.

The mechanical version of the same mistake

There is a second kind of absence, and it comes from production rather than judgement. When an SoA is assembled from a template, the failures that reach a client are placeholders that never got filled. In the drafting system behind BackPro, every block is scanned on save for six of them: a raw bracketed placeholder, an XXX stub, a dollar figure left as a literal $X, a TBD, an "insert something here" instruction that survived into the output, and a conditional that was never resolved either way.

Each one is a requirement someone meant to address and did not. A licensee spots a TBD in a second. The four absences above take a reviewer much longer, because each sits inside a paragraph that is otherwise fine.

What a check for absence has to look like

If the common mistakes are absences, reading harder does not find them. What finds them is working from the list rather than from the document: take each requirement in s947B or s947C, and in s947D where a product is replaced, and look for the place in the SoA that meets it. Where there is no such place, that is the finding.

That is how our compliance check is built. Each flag names the provision it comes from and quotes the words in the SoA it points at, and a flag whose quote is not in the document is dropped. None of this replaces the adviser's judgement about whether the advice is right for the client, which no list can make. It changes the question a reviewer starts from. The useful one is which of the statements the law requires the page does not contain.