Cut emphasis on payments in ASIC risk SoA


By Penny Pryor

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Adviser remuneration for life insurance does not need to be spelled out on the first page of a statement of advice (SOA), according to YTML Group.

In a submission to ASIC’s consultation paper on a new example SOA for life insurance, YTML detailed why the example document needs to be more balanced.

In ASIC’s current example SOA the remuneration structure – in both percentages and dollar amounts – is the first thing detailed in the document even before its table of contents and details of the product being recommended.

“We strongly believe that the SOA should not start with payments on the first page,” Terri Ho, YTML general manager of advice, said in the group’s submission late last month.

The YTML submission points out that the purpose of an SOA, as stated under ASIC’s regulatory guide 90.33, is “to communicate to the customer important and relevant information about the advice so they can make an informed decision about whether to act on the advice”.

Therefore an SOA needs to provide information about the advice along with the benefits, risks and costs associated with such advice, the group said.

“We propose that payment disclosure is moved to page three under the ‘Summary of My Recommendations’,” Ho said in the submission.

It would therefore follow the format of other user-friendly, consumer- targeted technical documents such as instruction manuals, where the table of contents follows the introductory page, to make document navigation easier.

“We believe the disclosure of commissions is over-played in its current position within the example SOA. This represents too much of a focus on remuneration,” the submission stated.

But YTML agreed the way in which the payment information is outlined – as percentages in the first and following years and then in a table of dollar amounts that those percentages will actually yield - enhances the customer’s understanding of what and how the adviser is paid.

YTML also suggested that the use of large font sizes for headings had the effect of dumbing down the document.

“[It] does not help reinforce the professionalism that sits behind the document. From our experience, this can be perceived negatively,” Ho said in the submission.

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