As many advisers look to navigate their way through the challenges presented by 515, Planlogic too worked through these same problems – helping our advisers overcome them to deliver compliant advice in the most efficient way possible. Outlined below is our perspective of the evolution of the landscape and the steps that we took (and still take) to ensure compliance.
Looking back – a paraplanner’s perspective
Things were quite simple at the onset. Advisers would decide which products to recommend and how they should be invested, and inform us about how to proceed. We would then complete the SoA and show only fee comparisons of the existing product vs. the proposed product. We were not required to show a breakdown of the features/gained lost, and there was no need to justify the recommendation of a product. The illustration below is a great example of how simple the comparison of existing vs. proposed products used to be:
Given that Planlogic primarily serviced RI Advice practices at the time, the first round of changes to the SoA (as we knew it then) were brought about by RI Advice revamping the entire SoA document. During this change, the following requirements were introduced:
- Replacement of a product
- Features gained/lost by replacing a product
- Justification for discounting products
The introduction of 515
When 515 was introduced, we soon realised that these new requirements (above) went further than illustrating product replacements and the benefits gained/lost due to platform recommendations. SoAs now had to be compliant as per the dealer group’s requirements, and had to ensure that all strategic and product recommendations were in the client’s best interest.
For the ‘product’ aspect of 515, we were required to illustrate like-for-like comparisons of various products on the Approved Product List (APL). We had many questions as we worked through this new regulatory landscape, and to find answers, we read and re-read the standards set out by RI Advice and eventually came up with the following summary:
- The requirement is to compare two products on the APL.
- If the proposed product is on the RI Advice APL, one other alternative product on the APL is required.
- If the proposed product is not on the RI Advice APL, two alternative products are required. Every existing product should always be considered as an alternative product.
- For investments, all products compared should be invested in the same way as the proposed portfolio.
- When the recommended funds are not available on alternative platforms, there are a few things to consider when choosing alternative funds:
- Is the recommended fund an active or passive investment? If the recommended fund is an active fund, the alternative fund will also have to be an active fund. If the recommended fund is a passive fund (such as an index fund), then the alternative fund will have to be a passive fund (another index fund available in the alternative platform).
- Is the recommend fund a diversified investment option or is it asset class-specific? For example, if the recommended option is a MyNorth Index Balanced, then the alternative on a platform such as BT Panorama would be the BT Index Balanced fund. If the recommended option is a property fund, then the alternative also needs to be a property fund.
- What is the actual asset allocation of the individual fund?
What do product comparisons look like today?
The complexities presented by 515 has drastically changed how comparisons look today – especially when compared against the simple comparison section in the previous illustration.
What we have learnt
Over the years, our key takeaway has been that understanding the purpose of completing a like-for-like comparison is key to doing them correctly. At the end of the day, it is all about proving that the recommended product is in the client’s best interest.
We would love to chat further and help you overcome the challenges posed by 515. Schedule a chat with us (https://www.planlogic.com.au/schedule-a-meeting/) or reach out to our Head of Partnerships, Jay Beckton (firstname.lastname@example.org) and we will be happy to get in touch.