What Must Be Included in an SoA Under the Corporations Act?

Most advisers know they need to produce a Statement of Advice. Fewer can say with confidence that every element of it meets the standard the Corporations Act actually sets.

The mandatory content requirements for an SoA are set out in sections 947B and 947C of the Corporations Act 2001. This article works through each of those requirements in plain terms - what the law says, what ASIC expects to see, and where advisers most often come unstuck.

Two Provisions, One Standard

The SoA content obligations appear in two sections rather than one, depending on who is providing the advice.

Section 947B applies where the SoA is given by a financial services licensee or an employee acting on the licensee's behalf.

Section 947C applies where the SoA is given by an authorised representative. The content requirements are substantively identical, with one key addition: the document must also state the name and contact details of the AFS licensee who has authorised the representative to provide the advice.

In practice, most advisers in Australia are authorised representatives, so s947C is the more commonly applicable provision. Both sections impose the same standard for content - and both require that everything in the document be expressed in a clear, concise and effective manner (s947B(6), s947C(6)).

That phrase carries more weight than it might appear to. It is not satisfied by a document that is simply long and comprehensive. An SoA that buries the client's situation in boilerplate language, or that includes product details irrelevant to the scope of advice, fails the standard regardless of length. The document must serve the client's understanding - not the adviser's file.

The Mandatory Elements, One by One

1. The advice itself

The SoA must contain a clear statement of the advice being given (s947B(2)(a), s947C(2)(a)).

This means a direct articulation of what the adviser is recommending: which products to acquire or dispose of, which strategies to adopt, what actions to take or avoid. The advice statement should be unambiguous. A client reading the SoA should be able to identify exactly what they are being recommended to do.

A common problem here is advisers treating the advice statement as a formality rather than the core of the document - burying it in background information or framing it so tentatively that the recommendation is not clear. The advice statement should stand on its own.

2. The basis for the advice

This is the element most frequently criticised in ASIC surveillance and licensee audits, and the one that carries the most weight under the law (s947B(2)(b), s947C(2)(b)).

The SoA must explain how the advice was reached. That means connecting the client's objectives, financial situation and needs to the recommendations being made, and showing why those recommendations address the client's circumstances. A basis statement that could appear in any SoA for any client does not meet this requirement.

The basis for advice section is also where the best interests duty (s961B) and the appropriateness obligation (s961G) must be demonstrated in practice. The law requires advisers to act in their clients' best interests and to ensure advice is appropriate to the client's circumstances - and the SoA is the primary record of how those obligations were met.

3. Adviser identity and contact details

The SoA must state the name and contact details of the providing entity (s947B(2)(c), s947C(2)(c)).

For licensees, this means the licensee's name and contact details. For authorised representatives, both the representative's details and the name of the authorising licensee must be included (s947C(2)(d)). Knowing who provided advice and under whose licence is material information for a client who later needs to raise a complaint or access dispute resolution.

4. Remuneration, commissions and other benefits

The SoA must disclose all remuneration, commissions and other benefits that the adviser, their licensee, related bodies corporate, directors, or associates will receive, to the extent those amounts could reasonably be expected to have influenced the advice (s947B(2)(d), s947C(2)(e)).

Dollar amounts are the preferred form of disclosure. Where a specific dollar amount is not known at the time of advice, a percentage or a written description is acceptable - but the disclosure must still be meaningful enough for the client to understand what is being received and by whom.

Under Regulation 7.7.11 of the Corporations Regulations 2001, the SoA must also disclose any remuneration the licensee received in connection with referring the client. Referral fee disclosure is a frequently missed obligation, particularly where a referral arrangement exists between an accountant or mortgage broker and the advice practice.

5. Conflicts of interest

Separate from remuneration disclosure, the SoA must also disclose any other interests of the adviser or their associates, financial or otherwise, direct or indirect, that might reasonably be expected to have influenced the advice given (s947B(2)(e), s947C(2)(f)).

This is broader than it might seem. It captures interests that are not themselves remuneration - such as an adviser's personal shareholding in a recommended company, an existing lending relationship between an associate and a product issuer, or any other circumstance where an independent observer might reasonably question whether the adviser's interests were fully aligned with the client's.

6. Warnings required under section 961H

Where an adviser provides advice based on information that is incomplete or inaccurate - because the client did not provide it, or it was not available at the time - the adviser must warn the client that the advice may not fully reflect their circumstances, and identify what information is missing or was not taken into account (s961H).

This warning must appear in the SoA. It is not sufficient to note the gap verbally during a meeting and leave it undocumented. The obligation exists precisely because a client who later reviews their SoA should be able to identify whether any limitations applied to the advice they received.

7. Switching recommendations - section 947D (where applicable)

Where the advice involves replacing one financial product with another - for example, recommending that a client cancel an existing insurance policy and take out a new one - additional disclosure obligations apply under s947D.

The SoA must set out the charges the client will incur as a result of the switch, to the extent those are known or can reasonably be found out. It must also document any benefits the client will lose - including loyalty features, grandfathered terms, premium discounts or existing claims entitlements.

This requirement applies to any product replacement recommendation, not just insurance. It is most commonly missed in life insurance replacement advice, where the loss of waiting periods or pre-existing condition cover is material to the client's decision and must be documented.

What "Clear, Concise and Effective" Actually Means

Meeting the content requirements above is necessary, but the way those requirements are expressed matters too. Every element of an SoA must be worded and presented in a clear, concise and effective manner (s947B(6), s947C(6)).

ASIC's guidance makes clear that this is not about length. An SoA is not clear, concise and effective because it is short. And it does not fail the standard because it is long. What it must do is communicate each required element in a way that the client can genuinely understand.

In practice, this means:

• Plain language - legal terms and product jargon should be explained or avoided where a plain equivalent works

• No unnecessary information - including product details or disclosures not relevant to the scope of advice adds length without serving the client

• Logical structure - a client should be able to move from their situation to the recommendation to the reasoning without having to piece it together from different parts of the document

• Proportionality - the level of detail should reflect the complexity of the advice; a scaled advice SoA for a single-issue query should look materially different from a comprehensive financial plan

ASIC has found in surveillance that some of the longest SoAs in the industry also fail the clear, concise and effective standard - not because of what they include, but because the way they are structured makes it impossible for a client to locate or understand the advice being given.

Content Requirements Are the Floor, Not the Ceiling

It is worth being direct about one thing: satisfying the content requirements of s947B and s947C does not, by itself, mean an SoA is compliant.

The content requirements set out what must be present in the document. They do not guarantee that the advice itself meets the best interests duty (s961B) or the appropriateness obligation (s961G). An SoA can contain every mandatory element and still fail a compliance review if the basis for advice is generic, the best interests analysis is superficial, or the recommended product is not appropriate to the client's circumstances.

The SoA is not a form to complete. It is a record of advice that must have been given well. The document must reflect genuine analysis, genuine inquiry and a genuine connection between the client's situation and the outcome being recommended.

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