How to navigate through a statement of advice

An advice document is large and complex due to its disclosure and compliance requirements. While this is designed to protect the client it can make it hard to read. This how to guide explains the different sections of a statement of advice document.

1)     About you

The about you section lists all the information the advisor has about your current situation for which they have based their advice. Make sure you agree with this information and bring to the advisors attention any discrepencies.

2)     Advice summary

The advice summary discloses your stated goals, areas advice is being provided, areas where no advice is being provided and the risks involved. If your goals or situation has changed it is important to bring it up with your advisor.

3)     Strategy recommendation

This section talks about what strategies your advisor is recommending, the benefits of the strategy, why those strategies were recommended, how they meet your stated goals, any trade off’s and disclosures.  It is important you understand the recommended strategy and that you are happy with the expected outcomes.

4)     Asset allocation

If your strategy involves investments your advice document will disclose your asset allocation. This shows where your money is invested in terms of asset classes and should align with the risk profile completed at your earlier fact find meeting. If the asset allocation does not align with your risk profile or their licensee standards they must disclose why and how it is still in your best interest.

5)     Product recommendations

Unless you have strategy only advice your financial advisor will also make a product recommendation. This section will tell you what products are being recommended, what investments or insurances are being recommended within the product, what products are being replaced if any, why and how the recommendation is in your best interest.

6)     Costs to you

Your statement of advice will disclose all costs including investment contribution fees, ongoing investment fees, insurance premiums and any other fees or charges. It is important you understand how much you are paying and what you get for your money. If you have any questions make sure to bring them up with your financial advisor.

7)     Advisor fees and remuneration

Your financial planner must disclose any benefit they are receiving from provide you advice whether it be financial or soft benefits. This can be from upfront advice fees, ongoing advice fees, upfront commissions, ongoing commissions or other forms of remuneration. You want to check this to make sure everything being charged was previously agreed to and you are confident their advice is not biased.

8)     Ongoing service package

While not mandatory for you to take up financial planners have a duty of care to provide ongoing advice service packages. Have a look at these packages to see how much they cost, what you get for your money, how it can be paid and whether you see value in paying for these services.

9)     Summary of advice

If you have read the entire statement of advice before and want a snap shot without reading the entire document again turn to your summary of advice. It is normally a 1-2 pager which states your goals, advice recommendations, outcome of advice and where you would be without advice.

10)  Further information

Along with your advice document your planner will provide you with quotes and product disclosure statements. There will be a section in your statement of advice that lists all the supporting documents available to you including their version numbers and dates.

11)  Calculations, projections and assumptions

Your advice strategy will provide future cashflow and asset projections based on your current and recommended strategy. Because investment markets are unpredictable these projections should be used as a guide only and are based on assumptions which will be disclosed in your advice document.

12)  Fact sheets

Your statement of advice may come with fact sheets which provide general factual information. These may or may not be relevant to your financial position but were all considered when building your advice strategy.

When reviewing your advice document you must be sure the advice is appropriate, the strategy makes sense, the products fit your strategy and you understand all the costs. Your financial advisor will take you through the key areas and offer for you to sign an authority to proceed. Only sign the authority if you are comfortable with your advice. There is no reason you can not take it home to read through at your own pace. If you need help understanding your advice document or want to talk about getting advice for your own personal circumstances contact me through here.

What you need to know

Constancy Wealth Management Pty Ltd ABN 51 168 427 361 trading as Constancy Wealth is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706.

This information does not take your circumstances into account, so read the relevant disclosure documents and consider what’s right for you. If you acquire an AMP product or service, AMP companies and/or their representatives will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. Ask us for more details.

This post contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information