What Evidence Should Support Recommendations in an SoA?

When a licensee auditor or ASIC reviewer picks up an SoA, they are not just checking that the required sections are present. They are looking for evidence - the substance behind each recommendation that demonstrates the advice was genuinely in the client's best interests and appropriate to their circumstances.

Evidence in this context does not necessarily mean attachments, research reports or formal product comparisons. It means the documented reasoning, analysis and factual basis that supports each recommendation - the material that shows the advice was arrived at through a genuine process, not selected in advance and reverse-justified.

This article sets out what that evidence looks like in practice, what auditors focus on, and the gaps that come up most often in compliance review.

What "Evidence" Means in an SoA

Evidence in an SoA falls into two categories, and a well-constructed SoA needs both.

Factual evidence

The documented facts about the client that the recommendations rest on - their age, financial position, goals, existing products, risk profile and relevant constraints. These must be specific and attributable to this client. Factual evidence is what makes an SoA personal rather than generic.

Analytical evidence

The documented reasoning that connects the client's facts to the recommendations - how the adviser assessed those facts, what alternatives were considered, what analysis was applied, and why the recommended approach was preferred. Analytical evidence is what makes an SoA a genuine advice document rather than a product placement form.

What Auditors Look For Behind Each Recommendation

For each recommendation in an SoA, an auditor will typically want to see the following:

• The client need or goal the recommendation addresses: which specific objective does this recommendation serve, and how was that objective identified?

• Why this product or strategy: what features or characteristics of the recommended product make it appropriate for this client, as distinct from alternatives that were available

• Why not the obvious alternatives: particularly for product recommendations, an auditor will look for some acknowledgment that alternatives existed and why they were not recommended

• Quantitative support where available: projections, cost comparisons, or benefit estimates that demonstrate the recommendation is likely to achieve the stated objective

• Consistency with the client's risk profile: confirmation that the risk level of the recommended product or strategy is consistent with the documented risk profile, or an explanation where it is not

The Role of Projections and Modelling

Where a recommendation involves a strategy designed to achieve a specific financial outcome - retirement income, a savings target, insurance cover to replace income - projections and modelling are among the strongest forms of evidence available to the adviser.

A projection that shows a client's superannuation balance at retirement under the recommended strategy - compared to their current trajectory and to an alternative strategy - demonstrates the recommendation in a way that qualitative reasoning alone cannot. It also creates a clear record that the recommendation was based on analysis of the client's actual numbers, not general suitability.

Where projections are included, the SoA should state the assumptions used - growth rate, inflation, contribution level, drawdown rate - so a reviewer can assess whether the modelling was reasonable. Projections based on unrealistic assumptions are a separate compliance problem: the analysis exists, but it is not reliable evidence.

File Notes and the SoA: What Goes Where

Not all evidence needs to live inside the SoA itself. Detailed product research, full financial modelling worksheets and extended fact-find records can sit in the client file and be referenced in the SoA. What matters is that:

• The SoA itself contains enough factual and analytical evidence that a reviewer reading only the SoA can understand the basis for each recommendation - the supporting documents should add depth, not substitute for substance in the SoA

• File notes are contemporaneous - created at or near the time of the advice, not reconstructed after the fact

• Where the SoA references a file note, the file note actually exists and can be produced on audit

A common pattern that fails on audit: the SoA contains a statement along the lines of "as discussed, we considered a number of alternatives" - but no file note records what those alternatives were or why they were rejected. The statement in the SoA implies evidence that does not exist in the file.

What a Good Evidence Trail Looks Like in Practice

For a superannuation consolidation and investment option recommendation, a well-evidenced SoA might include:

• The client's current superannuation balance, fund and investment option, with fees and net return data

• The recommended fund's features, fees and investment option net return data

• A comparison showing why the recommended fund is preferable for this client - lower fees, better features, a specific benefit relevant to their occupation or insurance needs

• Projections of the client's balance at retirement under both the current and recommended arrangement, with assumptions stated

• Disclosure of any insurance held in the existing fund that will be lost on rollover, with confirmation the client has been made aware and accepted this

• Acknowledgment of any switching costs under s947D, with the adviser's assessment of why the recommendation remains in the client's best interests despite those costs

That is not an exhaustive list - the evidence required will always depend on the specific recommendation and the client's circumstances. But it illustrates the level of specificity auditors expect to see.

The Most Common Evidence Gaps

1. Recommendations not connected to client facts

The SoA contains a client fact summary and a recommendations section, but the two are not connected. A reviewer cannot see how the facts led to the recommendations. This is the most common structural failure in SoA documents and the one most likely to attract a finding.

2. No evidence of alternatives considered

The safe harbour requires a reasonable investigation into products that might achieve the client's objectives. Where the SoA is silent on alternatives, auditors will question whether the investigation was actually conducted - or whether the recommendation was predetermined.

3. Projections without stated assumptions

Projections are valuable evidence - but only if the assumptions behind them are visible and reasonable. An auditor who cannot see what growth rate or drawdown rate was used cannot assess whether the modelling is reliable.

4. File notes referenced but not in the file

The SoA implies that a broader advice process occurred - discussions, comparisons, client acknowledgments - but the file notes that would evidence that process do not exist or cannot be located. On audit, this creates the appearance that the process was not followed, regardless of what actually happened.

The Standard Is Not Perfection - It Is Defensibility

A well-evidenced SoA does not need to be exhaustive. It needs to be defensible - to contain enough factual and analytical substance that a reviewer reading it can see the advice was reached through a genuine process and is appropriate for this client.

The practical test: if the adviser were asked to justify any recommendation in the SoA to a licensee auditor or ASIC, could they point to material in the SoA - or a file note referenced in the SoA - that demonstrates why that recommendation was made? If the answer is no for any recommendation, there is an evidence gap that needs to be addressed.

Would your recommendations stand up to scrutiny?

RegiReview reviews the evidentiary basis of SoA recommendations against the best interests safe harbour and ASIC's RG 175 guidance - identifying where the evidence trail is thin, missing, or inconsistent before it becomes a compliance finding.

---

Not sure if your SoAs are compliant?

RegiReview assesses your advice documents against current requirements and gives you a clear picture of where the gaps are and what to do about them.

Claim your free credits now

No obligation. Results in under 30 minutes.