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Example Statement of Advice (SOA) for a limited financial advice scenario for a new client
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REGULATORY GUIDE 90 Example Statement of Advice (SOA) for a limited financial advice scenario for a new client August 2005
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 2 What this guide is about 1 This guide explains how and why we have developed an example Statement of Advice (SOA). The example SOA was developed in consultation with stakeholders, and we acknowledge their valuable contribution throughout the process. 2 This guide: (a) sets out the purpose of the example SOA (Section 1); (b) outlines the framework in which the example SOA was developed (Section 2); and (c) explains why certain information has been included, or not included, in the example SOA (Section 3).
Note: For the example SOA, see Appendix B. For details of the financial advice scenario on which the example SOA is based, see Appendix A. 3 This guide should be read in conjunction with guidance we have issued on how we will administer the SOA requirements, including: (a) Policy Statement 175 Licensing: Financial product advisers— conduct and disclosure [PS 175]; (b) Licensing: The scope of the licensing regime: Financial product advice and dealing—An ASIC guide (November 2001, reissued May 2005); (c) Policy Statement 167 Licensing: Discretionary powers [PS 167]; (d) Policy Statement 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) [PS 168]; (e) Media Release [MR 04-062] FSR disclosure to be clear, concise and effective (10 March 2004); (f) Media Release [MR 04-236] ASIC provides further guidance on Statements of Advice (21 July 2004); and (g) Information Release [IR 04-61] ASIC provides guidance on Statements of Advice (30 November 2004).
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 3 Contents What this guide is about . . 2 Section 1: About the example SOA . . 4 Aim . 4 Context . 4 Status . 5 Section 2: Framework . . 6 FSR refinements . 6 Legislative requirements . 7 Policy objectives . 8 Section 3: Explanation . . 11 Front cover . 11 Summary of my advice . 11 Section 1: Important information about you ... 11 Section 2: My advice to you . . 12 Section 3: What else you need to know . . 13 Authority to proceed . . 15 What’s not included in the example SOA .
. 15 Design and layout . . 17 Key terms . 18 Related papers . 20 Appendix A: Financial advice scenario . 21 Appendix B: Example SOA . . 22 Important note: This guide was first published on 31 August 2005. This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act 2001 applies to you.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 4 Section 1: About the example SOA Aim 1.1 We have released the example SOA to illustrate a clear, concise and effective SOA in 20 pages or less. Our aim was to develop a worked example of good disclosure practice (but not necessarily best practice) for a particular financial advice scenario that satisfies a basic level of disclosure and complies with the law. 1.2 We will continue to monitor developments in SOA disclosure (e.g. the introduction of dollar disclosure requirements, the outcomes of FSR refinements and ongoing feedback from stakeholders) to adapt and improve the example SOA over time.
Context 1.3 The example SOA was developed in the context of the Australian Government’s proposals paper Refinements to Financial Services Regulation (May 2005): see Section 2. This paper identified a need for more guidance on the SOA requirements. We consider that the example SOA will help advisers comply with the SOA requirements. 1.4 We have designed the example SOA based on a hypothetical and limited financial advice scenario (not requiring a full financial plan) developed in consultation with stakeholders. The financial advice scenario deals with personal advice about investing in managed funds and basic deposit products and personal insurance, given to a new client (i.e.
not in an ongoing advisory relationship). The advice we developed is one of a number of possible outcomes. We may in the future decide to produce further example SOAs (e.g. dealing with advice about general insurance products and superannuation), but this will depend in part on the preparedness of industry both to engage with the spirit of the example SOA and produce its own examples dealing with specific issues.
Note: See Appendix A for details of the hypothetical financial advice scenario. 1.5 While we have tried to ensure that the financial advice scenario is as realistic as possible, we recognise that there might be disagreement with some aspects (e.g. the fact that the scenario does not deal with general insurance). Our aim in releasing the example SOA is to illustrate clear, concise and effective disclosure and not to illustrate the giving of suitable or best advice.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 5 1.6 Therefore, the advice in the example SOA should not be construed as ASIC giving what it considers as best advice.
The example SOA is purely intended to show how an adviser could produce a complying SOA that is not a lengthy or complex document. It is important to remember this purpose when considering the example SOA. 1.7 We think that the example SOA demonstrates that advisers can produce clear, concise and effective SOAs without incurring unrealistic or uncommercial costs. The example SOA contains substantial generic information that would be included in: (a) every SOA produced by the adviser; (b) every SOA recommending personal insurance produced by the adviser; or (c) every SOA recommending investment in managed funds produced by the adviser.
as well as information that is specific to the clients. Status 1.8 We have designed the example SOA based on what we think is good disclosure practice (not best disclosure practice) for an SOA dealing with a comparable financial advice scenario. The example SOA has not been designed for use as a template, so it is very unlikely that an adviser could use it without significant modification. 1.9 We suggest that advisers consider the style, content and layout of the example SOA in light of the particular SOA they are producing. We recognise that the style, content, layout and length of an SOA will vary depending on various matters, including the complexity of the advice.
1.10 Our general approach to compliance with the SOA requirements is set out in Part D of [PS 175]. We will continue to assess SOAs against the existing law and our existing policy. The example SOA is an illustrative aid. We encourage industry to consider it in preparing clear, concise and effective disclosure. We do not intend to assess any SOAs against the example SOA in a compliance review.
1.11 We intend to release a revised version of the example SOA based on stakeholder feedback (including, from consumer groups) and the outcomes of FSR refinements. At that time, we will confirm whether there are any changes to the status of the example, or our approach in enforcing compliance with the SOA requirements. 1.12 You may reproduce all or any part of this guide, including the example SOA, in hard copy and/or in electronic format for sale or otherwise without asking for further permission from ASIC.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 6 Section 2: Framework 2.1 The framework in which we developed our example SOA included: (a) the FSR refinements; (b) legislative requirements for SOA disclosure, particularly Part 7.7 of the Corporations Act 2001 (Act); and (c) the policy objectives of the SOA requirements.
FSR refinements 2.2 On 2 May 2005, the Government released its proposals paper Refinements to Financial Services Regulation on refining aspects of financial services regulation, including the SOA requirements: see Refinements Proposals 2.1 and 2.2.
2.3 The proposals paper also identified a need for further guidance on SOA disclosure. It noted that ASIC had agreed to issue further guidance on compliance with the SOA and clear, concise and effective obligations, including a model SOA: see page 9 of the proposals paper. We have released the example SOA to meet this obligation. 2.4 We have developed the example SOA on the assumption that certain FSR refinements will be implemented, in particular: (a) Refinements Proposal 2.2 Under this proposal, the Corporations Regulations 2001 (the regulations) would be amended to clarify that advisers are not obliged to include in an SOA information on alternative products or strategies that are considered, but that do not form part of the final recommendation given by the adviser.
(b) Refinements Proposal 6 Under this proposal, basic deposit products would be exempted from the Product Disclosure Statement (PDS) requirements by regulation, subject to appropriate oral disclosure and adequate accessible disclosure of information on fees and charges on application, at point-of-sale and on a website. 2.5 We will continue to monitor FSR refinements to adapt the example SOA as necessary and appropriate.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 7 Legislative requirements 2.6 We consider that the example SOA will help advisers to comply with the SOA requirements in Part 7.7 of the Act. 2.7 Under s947B, 947C and 947D, an SOA must contain: (a) a statement setting out the advice (s947B(2)(a) and 947C(2)(a)); (b) information about the basis on which the advice is or was given (s947B(2)(b) and 947C(2)(b)); (c) a statement setting out the name and contact details of the providing entity and where relevant, the authorising licensee (s947B(2)(c) and 947C(2)(c) and (d)); (d) information about remuneration, commission and other benefits capable of influencing the providing entity in providing the advice (s947B(2)(d) and 947C(2)(e)); (e) where the personal advice is based on incomplete or inaccurate information, a statement setting out the warning required by s945B (s947B(2)(f)) and 947C(2)(g)); (f) where the personal advice recommends the replacement of one financial product with another financial product, the additional information required by s947D; and (g) any other statements or information required by the regulations (s947B(2)(g) and 947C(2)(h)).
2.8 These requirements are subject to two general limitations: (a) Level of detail The level of detail for each matter is generally what a person would reasonably require for the purpose of making a decision about whether to act on the advice as a retail client: s947B(3) and 947C(3). (b) Clear, concise and effective The statements and information in an SOA must be worded and presented in a clear, concise and effective manner: s947B(6) and 947C(6). Note: For guidance on clear, concise and effective disclosure, see [MR 04-062], [MR 04-236] and [IR 04-61].
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 8 Policy objectives 2.9 The example SOA and this guide are underpinned by our existing policy guidance on the SOA requirements, including the requirement for clear, concise and effective disclosure.
Note: See [PS 175.120]–[PS 175.165], the Good Disclosure Principles at [PS 168.10] and [PS 168.41]–[PS 168.76], [MR 04-062], [MR 04-236] and [IR 04-61]. Purpose of an SOA 2.10 The purpose of an SOA is to communicate to the client important and relevant information about the advice, so that they can make an informed decision about whether to act on the advice. As outlined in [PS 175], we consider that an SOA should clearly, concisely and effectively summarise for the benefit of the client: (a) the advice; (b) the basis of the advice (including any advantages and disadvantages of the advice); and (c) any conflicts of interest for the providing entity and its licensee (where relevant).
Note: In [PS 175.120], we say that the SOA is a disclosure document that helps a retail client understand (and decide whether to rely on) personal advice. For further guidance on preparing and providing an SOA, see Part D of [PS 175]. 2.11 Consistent with this purpose, we have developed and designed the example SOA as a communication tool that sets out and explains the advice. It has not been designed for use as: (a) a compliance tool; (b) a mechanism to protect the providing entity against liability; (c) a complete record of all information which you would expect to find in the client file (i.e.
the information kept about the advice provided to the client in accordance with the record-keeping obligation we impose on licensees: see paragraph 2.12); or (d) the place to include additional information not required by law (e.g. educational material).
Note 1: For guidance on preparing and providing suitable personal advice, see Part C of [PS 175]. Note 2: For guidance on including additional information in an SOA and the clear, concise and effective disclosure requirement, see [MR 04-236].
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 9 2.12 We impose a licence condition requiring licensees to keep (or cause to be kept) records for the following matters for at least seven years from the date that personal advice is provided to a retail client: (a) the client’s relevant personal circumstances as determined by s945A(1)(a)(i); (b) the inquiries made about those relevant personal circumstances as required by s945A(1)(a)(ii); (c) the consideration and investigation conducted on the subject matter of the advice (s945A(1)(b)); and (d) the advice, including the reasons why the advice was considered to be ‘appropriate’ (s945A(1)(c)).
Note: For details of the record-keeping obligations see Pro Forma 209, condition 57 [PF 209] and Part C of [PS 175] in particular [PS 175.93]–[PS 175.100]. 2.13 The information we require to be kept under the record-keeping obligation will help to demonstrate that the providing entity has satisfied the ‘suitability rule’ or ‘the reasonable basis for advice’ in s945A. Under this rule, where a providing entity provides personal advice to a retail client: (a) the providing entity must make reasonable inquiries about the client’s relevant personal circumstances; (b) the providing entity must give such consideration to, and conduct such investigation of, the subject matter of the advice as is reasonable in all the circumstances; and (c) the advice must be appropriate for the client.
2.14 We have developed the example SOA on the basis that the adviser in our financial advice scenario is maintaining information on a client file in accordance with the record-keeping obligation imposed on its licensee. We have assumed that this information shows that our adviser meets the suitability rule in s945A.
2.15 We have not included in the example SOA all of the information we would usually expect to find in the client file. For example, the example SOA does not include information about the alternative products and strategies considered but rejected by the adviser in providing the advice. However, we would expect that this information would be clearly set out in the client file.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 10 Other communications with a client 2.16 In developing the example SOA, we considered what information could be excluded based on both the disclosure requirements in Part 7.7 and the purpose of the SOA in the context of the whole adviser-client relationship.
2.17 The SOA is intended to communicate to the client particular information at a particular point in time. Over the course of their relationship, however, an adviser and client will consider and discuss a broad range of matters that help provide the background to (and eventual basis for) the advice that is provided.
2.18 Some of these matters include: (a) the client’s personal circumstances (including their tolerance to risk); (b) the client’s financial circumstances; (c) the client’s goals and objectives; (d) financial concepts, including the concept of risk and return and what this means for asset allocation when investing; (e) the financial services that the providing entity is authorised to provide (including the cost of those services and any limitations that apply to those services); (f) information about financial strategies and financial products; and (g) the advice itself (including its cost, advantages and disadvantages and alternative products and strategies that were considered but disregarded by the adviser).
2.19 While these matters may provide a context to and background for the advice, the SOA might not need to include information about all of them in detail or even at all. Information about these matters could be provided to the client in: (a) other documents, including the Financial Services Guide (FSG), PDS or promotional literature; (b) verbal communications, such as face-to-face meetings and telephone conversations; and (c) other written communications, such as emails, faxes and letters.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 11 Section 3: Explanation 3.1 This section of the guide explains what information we have included in the example SOA and why.
It also explains some of the information we have excluded from the example SOA and why. Front cover 3.2 The front cover sets out basic information the clients need to know before they read the content of their SOA. This includes: (a) the fact that the document is called a Statement of Advice (SOA); (b) the name of the providing entity and their contact details; (c) the name of the authorising licensee and their contact details; and (d) what the SOA is about and why the clients should read it. Summary of my advice 3.3 Consistent with our existing policy on clear, concise and effective disclosure, we have included a ‘summary’ in the example SOA: see [MR 04-236] and [IR 04-61].
The summary highlights the important information of the example SOA and indicates where more detail can be obtained. It highlights: (a) the advice; (b) why the advice is appropriate; (c) risks of the advice; (d) fees and commissions (i.e. conflict of interest information); and (e) next steps.
Section 1: Important information about you 3.4 This section summarises details from the clients’ personal and financial profile that are relevant to the advice being provided and the basis of the advice. 3.5 Details we considered relevant to summarise were: (a) the clients’ goals and objectives as described by them; (b) the clients’ personal circumstances; (c) how much money the clients have to invest; (d) what the clients’ assets and liabilities are; and (e) the clients’ attitude to risk.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 12 3.6 While the relevant client file would contain more detailed information about the personal and financial circumstances of the clients (in accordance with the record-keeping obligation), we did not consider it necessary to include all of this information in the example SOA in this instance.
We recognise that the level of relevant personal and financial information included in an SOA may vary depending on the scope and complexity of the advice being sought and the circumstances of the particular client.
Section 2: My advice to you 3.7 This section clearly and concisely sets out what the advice is and the basis for the advice. We have limited the information in this section to relevant information the clients need to know in order to: (a) understand what the advice is; and (b) decide whether to rely on the advice. 3.8 This information is under five separate headings, which pre-empt the questions we think the clients are likely to have about the advice. The information under each heading is sufficient to answer the question. However, we recognise that the types of questions a client may have and the level of information provided in an SOA may vary depending on the advice being sought and the circumstances of the particular client.
What is my advice? We have not included a detailed discussion about any of the recommended financial products because this will be in the relevant PDS. We have assumed that no PDS is required for the high interest at-call joint deposit account. We have also assumed that the adviser will provide relevant information about deposit accounts. Why is my advice appropriate for you?
We have summarised why each recommendation is appropriate for the clients in our financial advice scenario under ‘What is my advice?’ We have limited the information to key points we think the clients need to know about each recommendation to understand why the advice meets their goals and objectives in Section 1. We have not included a detailed analysis of each of the recommended insurance products. We consider that the example SOA provides sufficient information for the clients to understand why the type and amount of insurance cover has been recommended. However, we have assumed that the adviser in our financial advice scenario has sufficient information on the client file, in accordance with the record-keeping obligation, to show that its advice meets the suitability rule in s945A.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 13 Does my advice have any disadvantages? We believe that a discussion about the appropriateness of the advice (and its advantages) should be followed by clearly pointing out the key disadvantages and risks of the advice, so that the clients have all the information they need to make a decision. We have deliberately not included generic information about risk (e.g. generic references to inflation risk or currency risk). We have tailored the information to the particular clients and recommendations.
One disadvantage in our financial advice scenario is that the selected products will not achieve the clients’ objective of doubling their money in ten years. A risk is that the value of the managed funds may decrease.
Note: In [IR 04-61], we say that risk disclosure should describe the significant risks the client will bear in acquiring the recommended product specifically and in acquiring the recommended class of products generally. We think the example SOA satisfies this requirement. What are the consequences of replacing one financial product with another? This question addresses the disclosure obligation in s947D of the Act. Section 947D applies where personal advice is, or includes a recommendation, to replace one financial product with another. We think the example SOA satisfies s947D for our financial advice scenario.
We have referred the clients to Section 3 for information about product costs for the recommended financial products instead of repeating it here.
What doesn’t my advice deal with? This question highlights any gaps in the advice and reminds the clients that the adviser can provide them with further advice if they want it, at an additional cost. This gives the clients enough information to make them aware of other matters they might need to consider sometime in the future. It also shows the limited scope of the advice. We have deliberately drafted this information so it is not a disclaimer or warning. Section 3: What else you need to know 3.9 The information in this section addresses the conflicts of interest of the adviser and her licensee.
It also addresses some of the other key questions the clients might have about the advice. 3.10 As in Section 2, we have used headings to pre-empt possible questions. Again, we recognise that the types of questions a client might have and the level of information provided can vary depending on the advice being sought and the circumstances of the particular client.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 14 3.11 The key questions and information we considered that the clients in our financial advice scenario needed to know about include: (a) fees for the advice and for preparing the SOA; (b) commissions the adviser and the licensee will receive if the clients decide to follow the advice and what this means for the advice being provided; (c) product costs the clients will pay if they purchase or invest in the recommended financial products; Note: for further guidance on disclosure of product costs, see paragraph 3.13.
(d) whether the adviser is restricted to an approved product list and what this means for the advice being provided; (e) whether the licensee is associated with any of the recommended investments; (f) whether the adviser guarantees the investments that have been recommended; (g) whether the clients can change their minds about any of the purchases and investments after they have invested their money; Note: It is important that the clients know about their cooling off-rights. Because the example SOA refers the clients to the PDS for each financial product rather than providing detailed information in the SOA, we have assumed for this purpose that the adviser has explained to the clients the importance of their cooling-off rights and has shown them where the information is located in the PDS.
(h) whether the advice has a time limit; and Note: We have included this information to highlight that the advice has a time limit and that the clients shouldn’t act on it after a certain date. It is important for the clients to know that the advice is only appropriate for them at this point in time, based on their personal and financial circumstances and other factors such as products currently on the licensee’s approved product list. (i) whether the clients’ personal information is protected. 3.12 In disclosing fees, commissions and product costs, we believe that the SOA should explain to the clients why they need to know this information.
We have also tried to be very clear about what the fee for the advice is, what the commissions are and what the cost of each product is.
3.13 We consider that, given our financial advice scenario, information about the cost of the managed funds is required by s947D. We have included these product costs here, instead of Section 2, so that all the fee- related information is in one place in the SOA. (We have cross-referred
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 15 to this information in Section 2.) We have also referred the clients to the PDS for each product for more information. We encourage you to consider when information about product costs should be disclosed in an SOA even if it is not required by s947D.
We think that, generally, a consumer would be interested to know about product costs when deciding whether to act on personal advice and such information would be disclosed as a matter of good practice.
Authority to proceed 3.14 We have noted that industry practice seems to be to include some kind of document giving the adviser an ‘authority’ to proceed according to the advice. We have included an ‘Authority to proceed’ along with a checklist of important things the clients should make sure have been done before they act on the advice. What’s not included in the example SOA Table of contents 3.15 Because the example SOA is only 12 pages (including the authority to proceed), we decided not to include a table of contents. The beginning of each section clearly summarises the information included in that section and we have used navigational tools (e.g.
pointers) to highlight important information we want clients to consider. As outlined in our existing policy, we think that a table of contents might be necessary in a longer document.
Note: For further guidance about using navigational tools in an SOA, see [IR 04-61]. Disclaimers and warnings 3.16 Consistent with its purpose as a communication tool (and not a mechanism to protect against liability), we have not included any of the usual disclaimers or warnings in the example SOA. This means that the SOA can focus on setting out and explaining the advice. 3.17 We have excluded this information because it is not designed to help the clients understand (and decide whether to rely on) personal advice. We think it would be more appropriate to include this type of information in other documents (e.g.
documents that establish the legal relationship between the adviser and the clients, such as the FSG or the letter of engagement).
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 16 Product information 3.18 We have not included detailed information about the recommended financial products in the example SOA because this information will be in the PDS for each product. We have assumed, however, that the adviser has drawn the clients’ attention to the relevant information in each PDS. 3.19 The PDS is the point-of-sale document that sets out the significant features of a financial product, including its risks, benefits and cost. Its broad objectives are to help consumers compare and make informed choices about financial products.
Note: For further guidance about complying with PDS requirements, see [PS 168]. Financial services provided 3.20 We have not included information about any of the other financial services provided by the adviser because this information would be available in the FSG. We have assumed, however, that the adviser has drawn the clients’ attention to the relevant information in the FSG. 3.21 Under the Act, the FSG must include (among other things) information about the kinds of financial services that the adviser is authorised to provide: s942B(2)(c) and 942C(2)(d). Note: For further information and guidance about what must be included in an FSG, see Part B of [PS 175], particularly [PS 175.69].
Additional information 3.22 We believe that an SOA should be confined to explaining the advice and the basis of the advice. This means we have not included any information in the example SOA that does not satisfy this purpose. 3.23 In this context, we have taken the view that it might be more appropriate for additional information not material to the advice or the basis of the advice to be given to, and discussed with, clients through some other means (e.g. in other documents like promotional material, or in face-to-face meetings). In developing the example SOA, we have assumed that the adviser has told the clients that they can provide additional information on request.
3.24 While we recognise that the SOA may have some educational value, its primary purpose is as a disclosure document. We believe that it is not realistic for the information in an SOA to be used to fully educate a consumer about investing their money. This means we have not included additional educational information. Note: On the front cover of the example SOA, we have referred the clients to the providing entity’s website and FIDO (ASIC’s consumer website) for more information.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 17 Design and layout 3.25 We have used simple design and layout techniques in the example SOA (e.g.
pointers, tables and headings) to help highlight key information and make the document easier to read. We have clearly cross-referred to other parts of the document as well as other disclosure documents instead of repeating information. 3.26 The example SOA is formatted in a common word processing package and uses language that is appropriate and likely to be easily understood by the clients. We have deliberately used simple, plain English. We wanted to develop a disclosure document that could be read and understood by anyone, regardless of their level of understanding about financial products.
3.27 We designed the example SOA so that it consisted of three separate sections with each section covering a different topic. In our view, the layout of the example SOA reflects the process of giving advice, including a discussion of: (a) the goals and objectives of the clients; (b) the personal and financial circumstances of the clients; (c) risk profile of the clients; (d) the advice; Note: The example SOA does not include information about the alternative products or strategies that are considered but that do not form part of the final recommendation given by the adviser. However, we would expect that this information would be maintained on the client file in accordance with the record-keeping obligation: see paragraphs 2.12–2.14.
(e) why the advice is appropriate; (f) the disadvantages of the advice; (g) the consequences of replacing one product with another; (g) what the advice doesn’t cover (e.g. its scope); (h) the conflicts of interest of the providing entity and the licensee including, fees, commissions and product costs; and (i) what the clients should do next.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 18 Key terms In this guide, terms have the following meanings: Act The Corporations Act 2001 (as amended by the Financial Services Reform Act 2003 and the Financial Services Reform Amendment Act 2003) including regulations made for the purposes of the Corporations Act ASIC The Australian Securities and Investments Commission example SOA The ASIC example SOA released on 31 August 2005 financial product Generally a facility through which, or through the acquisition of which, a person does one or more of the following: (a) makes a financial investment (see s763B); (b) manages financial risk (see s763C); (c) makes non-cash payments (see s763D) Note: See Div 3 of Part 7.1 of the Corporations Act for the exact definition.
Financial Services Guide A document that must be given to a retail client in relation to the provision of a financial service in accordance with Div 2 of Part 7.7 Note: See s761A for the exact definition. FSG A Financial Services Guide FSR refinements The proposals for refining aspects of financial services regulation in the Government’s proposals paper [IR 04-61] (for example) An ASIC information release (in this example numbered 04-61) [MR 04-062] (for example) An ASIC media release (in this example numbered 04-062) Part 7.7 (for example) A Part of the Act (in this example numbered 7.7) PDS A Product Disclosure Statement PDS requirements The requirements set out in Div 2 of Part 7.9 and related regulations Product Disclosure Statement A document that must be given to a retail client in relation to the offer or issue of a financial product in accordance with Div 2 of Part 7.9 Note: See s761A for the exact definition.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 19 proposals paper The Australian Government’s proposals paper Refinements to Financial Services Regulation (May 2005) [PS 175] (for example) An ASIC policy statement (in this example numbered 175) regulations The Corporations Regulations 2001 s912A (for example) A provision of the Act (in this example numbered 912A), unless a contrary intention appears SOA A Statement of Advice SOA requirements The disclosure requirements of Part 7.7 of the Act, including regulations made for this purpose Statement of Advice A document that must be given to a retail client for the provision of personal advice under Subdivisions C and D of Div 3 of Part 7.7 of the Act Note: See s761A for the exact definition.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 20 Related papers This guide is one of a number of publications on the implementation of the Financial Services Reform Act 2001. Related policy statements are: Policy Statement 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) [PS 168] Policy Statement 169 Disclosure: Discretionary powers [PS 169] Policy Statement 175 Licensing: Financial product advisers— Conduct and disclosure [PS 175] Policy Statement 182 Dollar disclosure [PS 182] Related class orders are: Class Order [CO 05/1556] Statements of Additional Advice Related information and media releases are: [MR 04-062] FSR disclosure to be clear, concise and effective (10 March 2004) [MR 04-236] ASIC provides further guidance on Statements of Advice (21 July 2004) [IR 04-61] ASIC provides guidance on Statements of Advice (30 November 2004) [IR 04-75] ASIC refines relief allowing Statements of Additional Advice (22 December 2004) Other relevant documents are: Licensing: The scope of the licensing regime: Financial product advice and dealing—An ASIC guide (November 2001, reissued May 2005) You can download copies of these documents from the Financial Services home page on www.asic.gov.au/fs.
You can also register for our free email update service, which alerts you to the latest developments, at www.asic.gov.au/joinfsrupdate. You can also get copies of these documents from ASIC Infoline on 1300 300 630. ASIC has published a list of frequently asked questions (FAQs) about specific FSR issues. For further information, visit the Financial Services home page at www.asic.gov.au/fs.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 21 Appendix A: Financial advice scenario Joe and Sue Black ask for advice from a financial planner, Sally Strong, who is an authorised representative of Planforit Pty Ltd, the holder of an Australian financial services licence. Sally is authorised to advise about superannuation, general and life insurance products, managed funds and deposit products. Joe is 43 and Sue is 41. They are married with two children aged 10 and 7. Both children are at government schools and it is not expected that they will go to private schools in the future.
Joe and Sue are both in excellent health and have standard private hospital cover.
Joe’s job pays $70,000 a year, before tax. Sue is a fulltime parent. They receive a family tax benefit from the Government of $6,457. Joe and Sue have no real savings (they usually have less than $2,000 in the bank). Joe and Sue jointly own a house valued at $350,000, with a $50,000 mortgage. They also own other assets valued at $85,000. Joe has $50,000 in an investment-linked industry superannuation fund (built up from employer contributions). Sue has $12,000 in a superannuation fund. Joe’s mother recently died and Joe got $100,000 under her will, which he has put in their joint access savings account.
This raises the amount in that account to $102,000.
Joe and Sue pretty well spend all the money Joe earns on paying the mortgage and living expenses, but they want to start investing for their future. However, they do not want to put the $102,000 in super just in case they need money to cover things like a new car, renovating the house or taking the family on a long overdue holiday (although they don’t think they will be spending money on these things within the next 4–5 years). Joe and Sue want advice about how to invest the $102,000 in their joint savings account.
Joe and Sue suggest that they would like to double their money in 10 years.
But Joe and Sue are both worriers and make it clear to Sally that, while it would be nice if the investment grew in value over time, they do not want to take too many risks. Joe tells Sally that he was told by a friend to invest the money in hedge funds because, the friend said, they offer strong growth with low risk. Joe and Sue tell Sally that they want to make some arrangements to protect themselves and their family in the event that either of them should die or become sick or injured. They tell Sally they do not want trauma insurance. They also say they do not want any advice about general insurance.
REGULATORY GUIDE 90: EXAMPLE STATEMENT OF ADVICE Australian Securities and Investments Commission August 2005 Page 22 Appendix B: Example SOA This example SOA (Version 1.0) is based on a hypothetical and limited financial advice scenario developed in consultation with stakeholders. The financial advice scenario deals with personal advice about investing in managed funds and basic deposit products and personal insurance, given to a new client (i.e. not in an ongoing advisory relationship). The advice we developed is one of a number of possible outcomes. The purpose of this example SOA is to illustrate clear, concise and effective disclosure and not to illustrate the giving of suitable or best advice.
Statement of Advice prepared for Joe Black and Sue Black by Sally Strong authorised representative (No. 45678) of Planforit Pty Ltd ABN 12 345 678 901 Australian financial services licence no. 12345 12 Monet Street, Melbourne, 3000 (03) 9280 3200 financialservices@planforit.com.au 31 August 2005 What this document is about Joe and Sue, you have asked for my advice about how to invest the $102,000 that you have in your joint access savings account and how you can protect your family in case either of you should die or become sick or injured.
This document (called a Statement of Advice or ‘SOA’) explains my advice.
At the front of the SOA, I highlight the key points of my advice, but please make sure you read each section of the SOA. A pointer symbol like this ) highlights something important. My contact details You can contact me on: (03) 9280 3200 My email address is: sstrong@planforit.com.au Postal address: 12 Monet Street, Melbourne, 3000 More information on investing For general information about insurance and investing (including a managed funds calculator to help you understand the effect of fees and different investment options) go to www.fido.asic.gov.au.
You can also visit Planforit’s website at www.planforit.com.au.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 2 Summary of my advice What my advice is • I recommend that Joe gets: o $800,000 of Life & TPD Cover from his super fund o Bygones Income Protection Cover to cover 75% of his income if he is unable to work because of illness, accident or injury. • I recommend that Sue gets $230,000 Life & TPD Cover from her super fund. • I recommend that you use the $102,000 in your DMF joint access savings account as follows: o $50,000 to pay off your mortgage o $12,000 invested in a high interest at-call joint deposit account with DMF Bank o $20,000 invested in the Bluebottle Balanced Managed Fund o $20,000 invested in the Balanced Alphabet Fund.
• I recommend that you do not invest in hedge funds. Why my advice is appropriate Having appropriate insurance will give you and your family protection in the event that either of you die or become sick or injured. The recommended investments are suitable for investors like you who want your money to grow over time and are prepared to take some, but not a lot of risk. You can still withdraw your money from these investments if you need it. Paying off your mortgage means you will no longer be making repayments, which will save you money. Risks in my advice All managed funds (including the managed funds I have recommended) carry some risk.
These investments are not like having money in the bank. There is a risk that their value might not go up as quickly as planned (or at all) and that their value might go down. What my advice doesn’t cover My advice does not cover trauma insurance (i.e. a lump sum payable on diagnosis of a defined illness or injury), your general insurance needs (e.g. car and house insurance), adequacy of your super for retirement, general tax issues and what you should do with the extra money you will have by paying off your mortgage. Fees and commissions The fee for my advice and for preparing this SOA is $700.
Of this, Planforit will get $280 and I will get $420. Please pay this within 14 days of receiving this SOA. If you follow my advice, Planforit will be paid upfront and ongoing commissions. You will also be charged fees for purchasing and investing in some of the products I recommend. Next steps To decide whether to follow my advice, you should: • make sure you understand my advice • ask me any questions you have. To follow my advice, complete the authority to proceed at the end of this document and return it to me.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 3 Section 1: Important information about you This section has information about you that I used in preparing my advice, such as: • your goals and objectives • your personal and financial information • your risk profile and financial knowledge. ) Please tell me if you think this information is wrong or incomplete because it will affect my advice. Your goals and objectives We met on 10 August 2005 for the first time. At that meeting, you told me you wanted advice about how to invest the $102,000 in your joint access savings account, which includes the $100,000 Joe inherited under his mother’s will.
You also told me that: • you wanted to make some investments to provide for your future • you wanted to protect yourselves and your family in case either of you should die or become sick or injured • you were hoping to double the value of your investments in the next 10 years or so, but you didn’t want to take too many risks • you wanted to be able to use the money if you needed it to pay for things like a new car, family holidays and house renovations. You are not expecting to make these purchases for at least 4–5 years • you didn’t want to put the money into Joe’s super because you don’t want the money locked away until Joe retires • you were thinking of investing in hedge funds because a friend said they have strong growth and low risk.
Your personal information Joe Sue 43 41 Employed as a computer programmer. Currently has 3 months sick leave available Full-time parent and does not intend to go back to work on a full-time basis Excellent health Excellent health No family history of hereditary diseases or early death No family history of hereditary diseases or early death Standard private hospital cover Standard private hospital cover You have a current will You have a current will You have two children: Katie is 10 and John is 7. They currently go to government primary schools. You do not expect that they will go to private schools.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 4 Your financial information What you earn and spend each year Your yearly income before tax $70,000 Your yearly income after tax $51,250 Benefits (Family tax benefits from the Government) $6,457 Your total yearly income after tax + benefits $57,707 Your total yearly expenses $57,200 (about $1,100 a week) This tells me that your income just covers your expenses, and doesn’t let you save much. What you own and what you owe Asset Owner Value Liabilities Amount House Both $350,000 Mortgage $50,000 DMF joint access savings account Both $102,000 Superannuation—Data Industry Super Fund Joe $50,000 Superannuation—QRS Super Fund Sue $12,000 Other assets Both $85,000 Total assets $599,000 Total liabilities $50,000 Your risk profile Investing involves risk.
Risk is the chance that an investment will not give you the returns you hoped for or that you will lose money. Almost all investments have risk, but some have more than others.
Generally, investments that are expected to pay higher returns involve more risk. While these investments are likely to produce higher returns over time than more conservative investments, over short periods they can fall in value and lose money. From our discussions, I think you are 'balanced' investors. That is, you want your investments to grow in value over time and will take some risks to achieve this. I have explained that your goal of doubling your money in ten years (even if achievable) would involve a much higher level of risk than you are comfortable with.
On this basis, I think an appropriate asset mix for you is: • about 40% in income assets (such as, for example, deposit products), and • about 60% in growth assets (such as, for example, some managed funds).
The chance of a negative return for this kind of asset mix is about one year for every five years you invest.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 5 Section 2: My advice to you This section tells you: • what my advice is and why it is appropriate for you • any disadvantages of my advice • the consequences of replacing one financial product with another • the important things my advice does not deal with. ) Please read this section carefully and ask me if you have any questions. What is my advice? • Based on what you are prepared to spend, I recommend the following personal insurance products: Type of cover Product* Product provider Amount of cover Life & Total & Permanent Disability (TPD) for Joe Data Life & TPD Cover Data Industry Super Fund $800,000 Income Protection for Joe (paid to you in the event of sickness or injury to age 65) Bygones Income Protection Cover with a 3-month waiting period Bygones Financial Services (Bygones) $4,375 per month (equal to 75% of your current monthly taxable income) Life & TPD for Sue QRS Life & TPD QRS Super Fund $230,000 * I have enclosed a Product Disclosure Statement (PDS) for each of these products.
The PDS will explain the cover (e.g. when you can make a claim).
• We discussed trauma insurance and you told me it was not a priority for you. • I recommend that you close your DMF joint access savings account and use the money in the following way: o You pay off the $50,000 mortgage you have with DMF Bank o You invest $12,000 in a high interest at-call joint deposit account with DMF Bank o Joe give the remaining $40,000 to Sue who invests it as follows: Amount Use/investment* Product provider Investor name $20,000 Bluebottle Balanced Managed Fund Bluebottle Financial Services Sue Black $20,000 Balanced Alphabet Fund XYZ Financial Services Sue Black * I have enclosed a Product Disclosure Statement (PDS) for each of these products.
• I recommend you do not invest in hedge funds.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 6 Why is my advice appropriate for you? Personal insurance You need personal insurance to protect your current financial situation and lifestyle should anything happen to either of you. Joe needs Life & TPD and Income Protection insurance because he earns the income. It is cheaper for Joe to get Life & TPD from his existing super fund. The amount of Life & TPD Cover (if invested) would generate enough to replace what Joe currently earns. This would give protection to Sue and the children. The income protection is the maximum amount available to Joe.
The amounts I have recommended take into account: • Joe's current income • cover under your existing super • your current assets including your savings, investments and super balance • that you will have no debt if you pay off your mortgage • whether Sue will go back to work in paid employment if you die or become sick or injured.
Sue also needs some insurance in case she can't continue to look after things at home. The amount of Life & TPD Cover would pay for replacing Sue's home duties until the children are old enough to contribute (i.e. in about 5–6 years). It is cheaper for Sue to get this cover from her existing super fund. The amount I have recommended takes into account: • the cost of hiring help to replace the work carried out by Sue • your current assets including your savings, investments and super balance.
Paying off your mortgage By paying off your mortgage, you will be better off than if you kept the mortgage and invested the $50,000.
Because you are no longer making mortgage repayments, you will have an extra $400 a month to use. Joe giving $40,000 to Sue to invest If Joe doesn’t give the money to Sue, he will still own the investments (even if they are in Sue’s name) and will have to pay the tax on the investment income at his marginal tax rate. Putting the investments in the managed funds in Sue’s name This means you will both pay less tax overall, because Sue doesn’t earn any income at the moment. Any income she does earn would be either tax-free or taxed at a very low rate. The income from the investments will not affect your entitlement to the $6,457 family tax benefit.
Putting $12,000 in a high interest at-call joint deposit account This gives you access to extra cash if you need it, without any withdrawal costs. The high interest at-call joint deposit account at DMF Bank is on Planforit’s approved product list. It offers a competitive interest rate similar to other high interest deposit accounts, and has the convenience of being with your current bank.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 7 Investing in the managed funds I have recommended This spreads your investments across a number of different classes of assets that suit your goals and objectives.
Bluebottle Balanced Managed Fund and Balanced Alphabet Fund invest in an asset mix of about 40% in income assets and 60% in growth assets. These funds are both on Planforit’s approved product list as suitable for balanced investors. By investing in two managed funds rather than one, you reduce your investment risk, in case one fund performs badly.
Not investing in hedge funds Hedge funds aren’t on the Planforit approved product list so I can't recommend them. In any case, they are unlikely to be an appropriate investment for you because they normally adopt investment strategies more suited to investors willing to take more risks. Does my advice have any disadvantages? Personal insurance The amount of cover recommended for Sue's life insurance is only sufficient to replace her contribution to the household for approximately 5–6 years.
Paying off your mortgage Because you are paying off your mortgage early, you might be charged a discharge of mortgage fee and legal fees.
You should contact DMF Bank about these fees. Putting $12,000 in a high interest at-call joint deposit account You must keep at least $5,000 in this account. Because this account will replace your current joint access savings account, you will also have to arrange for any automatic deposits (e.g. salary) or transfers (e.g. bill payments) to link to the new account. Investing in the managed funds You can withdraw money if you need it, but you must keep at least $2,000 in each fund to keep it open. While you can withdraw your money, if you do so within a short period of time (e.g. 3 years), you might find that the amount of money you can withdraw is less than the amount of your original investment.
You will pay a fee for adding to or withdrawing money, and on your account balance each month (see Section 3). Managed funds involve some investment risk and do not guarantee your returns. The value of your investments might not increase as you would like (i.e. they might not give you the return you want), and their value might fall. Changes in financial markets might change the value of your investment from day to day. Consequences of replacing one financial product with another Putting $12,000 in a high interest at-call joint deposit account The high interest at-call account offers a higher interest rate than your existing account.
There are no charges for withdrawing money from your existing account, and no charges for opening the new one. However, you have to keep a balance of at least $5,000 in that account whereas there is no minimum amount for your joint access savings account.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 8 Investing in the managed funds These funds charge higher fees than your joint access savings account, including fees on any money you put in (see Section 3). However, over the long term, you can reasonably expect a higher return from these investments (although this cannot be guaranteed). The value of your investments in the managed funds can change from day-to-day and might fall. Accounts like your joint access savings account or a high interest at-call deposit account offer more stability on a day-to-day basis.
You will pay a product fee to invest in the managed funds I have recommended (see Section 3). What my advice doesn't deal with What to do with the $400 extra you will have each month if you pay off your mortgage Some of this money can be used to pay for the insurance products I have recommended. Some other uses are: • saving the money in the DMF high interest at-call joint deposit account • putting extra money into the managed funds products I have recommended.
I can give you advice about this if you want me to, but at an additional cost. Whether you have enough of the right insurance You told me that you didn’t want any advice about general insurance (e.g. car and house insurance), so my advice does not deal with your general insurance needs. You also told me you didn't want any trauma insurance so my advice doesn’t cover that either. I have pointed out how important it is to have the right insurance. I can give you advice about general insurance and trauma insurance if you want it.
Tax issues I am not a tax adviser and can only give you limited advice about tax.
You may be entitled to a tax deduction for premiums paid on income protection insurance. I can refer you to a qualified tax adviser about this and other tax issues. Superannuation My advice does not consider whether you have enough superannuation for your retirement. I can give advice about this if you want it.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 9 Section 3: What else you need to know This section: • tells you about fees and any commissions I will get • explains what product fees you will pay • answers other questions you might have about my advice ) Please also make sure you read the Financial Services Guide (FSG) and ask me if you have any other questions. What are my fees? In addition to the commissions that I will receive if you follow my advice, I will charge you a fee of $700 (including GST) for my advice and for preparing this SOA. Of this, Planforit will get $280 and I will get $420.
Please pay this fee within 14 days of receiving this SOA. What commissions will I get?
If you follow my advice, the issuers of the products I have recommended will pay commissions to Planforit. I will get a share of those commissions. Some products pay a higher commission than other products. The products I have recommended are suitable for you. However, there might be other suitable products that pay a lower commission. Commissions paid by the product issuer—personal insurance products Product Premium Upfront commission paid to Planforit My share of the upfront commission Ongoing commission paid to Planforit My share of the ongoing commission Bygones Income Protection for Joe $731.25 for the first year $877.50 (equal to 120% of the premium for the first year) $789.75 (90% of the upfront commission) 7.3% per year based on that year's premium 90% of the ongoing commission Notes on commissions for personal insurance products Ongoing commission for Income Protection The amount of ongoing commission Planforit gets from Bygones depends on the amount of your premium.
Suppose the premium for Income Protection is $750, then Bygones will pay Planforit $54.73 (7.3% of $750) and of this I will get $49.27 (90% of $54.73). Bygones will work out the right amount and pay it to Planforit each month for as long as you continue to pay the premium. Life & TPD There are no upfront or ongoing commissions for these products. Commissions paid by the product issuer—managed funds products Product Amount to be invested Upfront commission paid to Planforit My share of the upfront commission Ongoing commission paid to Planforit My share of the ongoing commission High interest at-call joint deposit account with DMF Bank $12,000 Nil Not applicable Nil Nil Bluebottle Balanced Managed Fund $20,000 $600 (equal to 3% of the amount you invest) $330 (55% of the upfront commission) 0.3% per year 85% of the ongoing commission
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 10 Product Amount to be invested Upfront commission paid to Planforit My share of the upfront commission Ongoing commission paid to Planforit My share of the ongoing commission Balanced Alphabet Fund $20,000 $600 (equal to 3% of the amount you invest) $330 (55% of the upfront commission) 0.3% per year 85% of the ongoing commission Notes on commissions for the managed funds products Rebate of upfront commission 25% of the upfront commissions paid to Planforit will be rebated (paid back) to you. So, if you follow my advice, you will get a rebate of $150 for each of your investments in Bluebottle Balanced Managed Fund and the Balanced Alphabet Fund.
Ongoing commissions The amount of ongoing commission Planforit gets from product issuers depends on the value of your investment account. Suppose the value of your account in the Bluebottle Balanced Managed Fund on 30 September 2005 is $21,825: • Bluebottle will pay Planforit $5.40 out of your account for that month (0.3% of $21,825 divided by 12) • Of this, I will get $2.97 (55% of $5.40). Bluebottle will work out the right amount and pay it to Planforit each month for as long as you’re in its fund. The same applies to your investment in the Balanced Alphabet Fund.
What product fees will you pay? If you follow my advice, the insurance products and managed funds I have recommended will charge you product fees (see the PDS for each product for full details).
Here is what you will pay for your initial investments. Personal insurance products Type of cover Premium payable for the first year* Data Industry Super Fund—Life & TPD Cover for Joe $1,248.00 for the first year Bygones Income Protection for Joe $731.25 for the first year QRS Super Fund—Life & TPD Cover for Sue $334 for the first year Total $2,313.25 * Premiums can change from year to year. Bluebottle Balanced Managed Fund Fee type How the fee is worked out Amount Contribution fee 4% of your initial investment $800 (for your initial investment of $20,000) Additional contributions fees will apply if you make further investments in the future.
Management costs 2.5% per year on your average account balance The exact amount depends on your account balance. For example, on a balance of $20,000, the annual fee would be $500.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 11 Balanced Alphabet Fund Fee type How the fee is worked out Amount Contribution fee 4% of your initial investment $800 (for your initial investment of $20,000) Additional contributions fees will apply if you make further investments in the future. Management costs 2.5% per year on your average account balance The exact amount depends on your account balance. For example, on a balance of $20,000, the annual fee would be $500. )You might have to pay other product fees. Make sure you read the PDS for each product thoroughly.
If you have questions about product fees after reading the PDS, please call me. Other questions you might have Am I restricted to an approved product list? Yes. Advisers (like me) who work for Planforit can only recommend products on Planforit’s approved product list. This means that I looked only at products on that list when I prepared your advice. The Planforit approved product list is put together by a Planforit research team and is regularly reviewed. Ask me for a copy of the list if you are interested. Is Planforit associated with any recommended products? Yes. Planforit is partly owned by Bluebottle Financial Services, which manages Bluebottle Balanced Managed Fund.
Bluebottle Financial Services will benefit (through management and other fees) if you decide to invest in Bluebottle Balanced Managed Fund (see ‘What product fees will you pay?’).
Planforit is not related to XYZ Financial Services, which manages the Balanced Alphabet Fund. However, we get some free investment research from XYZ Financial Services because we have the Balanced Alphabet Fund on our approved product list. Planforit is not associated with DMF Bank, Data Industry Super Fund, Bygones Financial Services or QRS Super Fund. Do I guarantee the managed funds I have recommended? No. By law, the managed funds I have recommended must be ‘appropriate’ for you. However, I do not guarantee that those managed funds are the best for you or that they will perform in a particular way.
Can you change your mind? Yes. Even after you have paid for the products I have recommended, you might be able to get your money back if you are not happy (this is known as your ‘cooling off’ rights). Generally, for insurance products and managed funds, you can do this within 14 days of buying the product. The PDS for each product has more information about this. Does my advice have a time limit? Yes. My advice expires on 30 September 2005. You should not rely on my advice after that time if you haven’t acted on it by then.
Is your personal information protected? Yes. Information about you will not be given to anyone without your written permission unless the law says we must.
ASIC Example SOA: Statement of Advice for Joe and Sue Black, 31 August 2005 Page 12 Authority to proceed ) If you want to follow my advice, please sign and return the authority to proceed. ) Before you sign this authority, I would like you to check that I have:  given you my Financial Services Guide (FSG)  given you a Product Disclosure Statement (PDS) about each financial product that I have recommended  talked to you about your personal circumstances, insurance needs and financial goals in a way you understand, and answered your questions  discussed the risks involved in investing and how much risk you are prepared to take  discussed any fees you will have to pay.
If I haven’t done all of these things, don’t sign the Authority to proceed. ) Before you sign this authority, please also make sure that you have:  read all the documents I have given you  checked that your personal information in this document is accurate  asked me any questions you have. ) By signing below, you agree to the following products and investments being purchased on your behalf by representatives of Planforit. Personal insurance Product Amount of cover Product provider Policy holder Life & TPD Cover for Joe $800,000 Data Industry Super Fund Joe Black Income Protection for Joe $4,375 per month (equal to 75% of your current monthly taxable income) Bygones Joe Black Life & TPD Cover for Sue $230,000 QRS Super Fund Sue Black Investments Amount Use/investment Product provider Investor name $12,000 High interest at-call joint deposit account DMF Bank Joe & Sue Black $20,000 Bluebottle Balanced Managed Fund Bluebottle Financial Services Sue Black $20,000 Balanced Alphabet Fund XYZ Financial Services Sue Black ) Signed ) Signed … .
Joe Black / /05 Sue Black / /05
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