As a technology-enabled provider of financial planning solutions, Planlogic has consistently explored ways to deliver value to our advisers through the use of technology.

The ‘Future of the SoA Digital Interactive Guide’ launched by the FPA takes a much-needed look at the role of technology in changing the way advice is delivered, and aligns well with Planlogic’s Research & Development initiatives in the space.

This article dives into the key findings of the report, as we strive to keep our advisers abreast of disruption in the financial planning space.

The full ‘Future of the SoA Digital Interactive Guide’ can be accessed here: The Future of the SOA by FPA

Introduction

The ‘Future of the SoA Digital Interactive Guide’ launched by the FPA in December 2019 outlines how technology can be used to help advisers have more personalized and meaningful client experiences during the advice process.

While the current SoA includes disclosures and compliance requirements, ASIC has increasingly encouraged the industry to work towards documents that are clear and concise, and effectively communicate the purpose of the advice.

The Digital Interactive Guide revisits the purpose of the SoA with fresh eyes and explores what the next generation SoA could look like.

Objectives of the Working Group

The FPA invited a diverse group of financial planning professionals – spanning regulators, compliance experts, content and digital media specialists and advice technology specialists, among others – to form the Future of the SoA working group.

The working group agreed to the following objectives:

  • Move beyond information disclosure and ensure that clients understand the advice provided.
  • Explore methods to communicate better with clients. For example, more visual advice.
  • Build prototypes based on ASIC’s ‘Regulatory Guide (RG) 90: Example Statement of Advice’.
  • Make the evolution of the SoA more understandable to advisers.
  • Ensure the purpose of the SoA was adhered according to RG 90 i.e. communicating to the client important and relevant information about the advice so they can decide whether to act on the advice.
  • Explore how new and evolving technologies can enhance client experiences so that they can make informed decisions about their financial future.
  • Carry out tests with consumers, advisers and compliance teams.

How the SoA is Expected to Evolve

SoAs are expected to become more visual, as consumers shift towards interactions with visual content spanning pictures, videos and infographics on both paper-based and digital formats. Consumers will also be able to access their financial plans through secured portals and mobile phone apps.

Advice will move away from a ‘one size fits all’ approach towards more tailored experiences, with big data playing a key role in driving this change. Big data will be leveraged to provide insights on client behaviors, regulate non-subjective decision making by advisers and provide optimal recommendations for consumers by evaluating numerous scenarios and combinations of strategies – all while saving a significant amount of time.

Regulation Technology or ‘RegTech’ will help the industry shift from a reactive approach to become more proactive by enabling a safer strategy and product selection. RegTech will allow advisers and compliance teams to be alerted of any issues prior to advice being delivered to clients, saving the industry billions of dollars in reviewing and remediating past advice, and reducing pressure for regulators.

While technology will play a significant role in helping transform the industry, the human element will be required to assess the unique situations, preferences, biases and emotions of clients. The adviser will deliver value in a tech-enabled world through the human element by providing accountability, trust, validation and a physical presence.

Objectives of the Interactive SoA

The objectives of the interactive SoA explored in the report were based on 4 key themes:

  • Communicate important and relevant information about the advice, so that the client can make an informed decision on whether to act on the advice.
  • To make SoAs more clear, concise and effective.
  • Leverage insights from behavioral research to improve the design and user experience of SoAs.
  • To provide advisers with a simple and effective communication tool that complies with legislation.

Designing an Interactive SoA

In order to achieve the objectives mentioned above, an interactive SoA should aim to reduce the translation process for clients. People have 4 main internal learning systems:

  • Auditory – People that learn via verbal instructions and learn best by listening to voice or audio; and may prefer conversations and phone calls to written instructions.
  • Visual – 70% of people learn visually by memorizing pictures and capturing it in their minds. Visual clients may have trouble remembering verbal instructions.
  • Kinesthetic – Kinesthetic people learn through the feelings they get from the information they absorb. They tend to memorize things through practice and are practical thinkers.
  • Auditory Digital – These people learn by following systems, steps and processes. They tend to be analytical and respond to well-written documents with a clear flow.

The traditional way of providing written advice only allows for the auditory way of learning mentioned above. This acts as a barrier to people that learn differently as they are required to ‘translate’ this advice prior to the advice being absorbed. For example, a person that learns visually will be required to ‘translate’ auditory advice into visual images prior to the information being absorbed.

Given that more than 70% of people learn visually, it is important that SoAs cater to this method of learning. This eliminates the translation process that is required currently, and also prevents any loss in the auditory to visual translation.

SoAs can be made more effective through the use of videos, audio, color, imagery and infographics. Quizzes can also be used to ensure that clients actually understand the advice, and go beyond just the disclosure of information.

Ensuring Compliance

Any future interactive SoAs should ensure that compliance requirements are met, but should strive to ensure that the language used is understandable and memorable to the client while acting as protection for both the adviser and the client.

Further, SoA templates and advice statements could also be developed by the industry and standardized by ASIC to reduce the regulatory burden for compliance teams, while focusing on providing the best possible advice to clients. While this was not covered in the scope of the current report, it could be an area of focus in the future.

Initial Client Feedback

The report assessed consumer response to the digital SoA using a sample of eight real consumers of advice. The consumers were first presented with an SoA structured based on ASIC’s RG 90 and interestingly, the response to the document was positive, with consumers finding it well structured, clear and transparent. However, they did not feel that the document was geared towards improving financial decisions; and viewed it as a form of self-preservation for the adviser.

The same group of consumers found the digital SoA to be a lot more useful as it was less one-sided than the traditional SoA. This is because the digital SoA provided them with a sense of co-creation of advice and ensured that they were more informed about the advice being provided.

Despite being only a preliminary study, digital SoAs seem promising – allowing clients to make better decisions and stay more in control of their financial outcomes.

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