Separating Strategy from Product
The advice industry has long since moved on from a focus on product advice……
However, when reviewing SOA’s, sometimes the strategy has taken a back seat, and product is put front and centre. For example, an SOA may outline which product to use for an investment portfolio before the adviser has even outlined how much to invest and why, from a strategic point of view, investing is appropriate and the reasons and consequences for investing.
This doesn’t mean that the advice itself is bad advice (on the cantrary). Often, if not always, it is a symptom of process, and information being lost in translation from an adviser to a paraplanner.
Strategy first; Product second
As a trusted professional, your client doesn’t value your advice because you recommend they use the XYZ product. Your client values your expertise and experience in all things investment and strategy. Your client values your relationship because you understand what is important to them and they can trust that you have their best interests at heart when providing valuable advice at crucial times of their lives.
So why is it that when we look to review an SOA, the first thing we read is…..“John, we recommend you invest in XYZ Investment Fund” or “Jane, we recommend you rollover the balance of your superannuation to XYZ Super Fund”. From a client perspective, it misses a crucial opportunity to demonstrate the true value of your advice and that you understand what keeps your client up at night.
From a technical and regulatory point of view, ASIC expects advice providers to formulate the strategy they are basing the advice on before recommending that a client acquire a financial product.
Tips to avoid falling in the product trap:
Effective scoping – clearly articulate what advice the client is seeking. Consider whether it is reasonable to recommend a product based on the advice the client seeks.
Less is more - too often the SOA is full of standard text that just isn’t relevant to the client circumstances. Keep the reasons, consequences and alternatives relevant to the client circumstances, rather than full of generalised disclaimer junk.
Keep product separate – there are a long list of products available to execute your strategy. Keep your product recommendations separate, and demonstrate why you have recommended that particular product given the clients circumstances.
Use an effective SOA Request – If you are working with a paraplanner, information can get lost in translation. Use an effective SOA Request template that separates strategy from product. The iComply2 Xplan wizards separate strategy from product and helps to remove the ambiguity when working with the paraplanner.
At IIP Dealer Group, we pre-vet every SOA before they are approved to be sent to the client. Whilst this may seem a bit conservative to some, we believe it is an essential service in supporting our advisers to not only avoid the risk of breaching, but to also show the value of their advice and