Statement of advice and Best interest obligations

A statement of advice is a document that outlines the advice given to a consumer by the authorized planner or adviser of an AFSL. A statement of advice highlights the recommendations of financial advice giving regards to the clients financial position. A statement of advice is prepared by the Australian licensed advisors based on the investor’s objectives and goals. If the goals and objectives of the clients change then a new fact find on the client is made by the adviser and a new statement of advice should be prepared for the client by the adviser.  In the statement of advice, the strategies and plan of action are presented in a clear and easy to understand manner.  Risks of the advice must be presented along with the fees the adviser will earn.  The statement of advice must also outline why the advice is appropriate for the client and any conflicts of interest and disclosures the adviser has.

Legislative requirements of the statement of advice

Date of financial advice

Description of the personal advice

Best Interest Obligations

Type of product of service

Authorized company, its contact details and AFSL number

Personal Insurance Recommendations & opinion

Recommendation on Investments & Funds management

Disclosure of Information on remuneration, commission & other benefits

SOA should provide accurate, clear, concise and relevant information to client to make effective decision.

Before making effective statement of advice, the financial advisors need to summarize the clients’ personal and financial profile.

The authorized advisor or entity should look into the following details.

1.        Clients’ goals and objectives on the investment
2.        Clients’ risk profile
3.        how much a client can afford to extend on the investment
4.        Clients’ assets and liabilities