AFA submission to Quality of Advice Review
AFA News 16 June 2022. On 10 June 2022, the AFA provided our submission on the Quality of Advice Review to Treasury, including addressing the 83 questions that were raised in the Quality of Advice Issues Paper.
In this submission, we have acknowledged the depth of the issues in financial advice and the implications of this for Australians seeking access to affordable financial advice. As we have observed the number of financial advisers decline by over 40% over the last three and a half years, and the cost of financial advice rise substantially, we have also seen financial advisers being very selective in terms of which clients they wish to take on and which ones they wish to retain.
We thank members for feedback as part of this consultation process. We have heard a number of messages, including with respect to the elevated compliance obligations flowing from regulatory change, regulatory uncertainty and licensee risk aversion; the administrative complexity and extra cost involved in the new annual renewal and client consent process; and the importance of holding onto commissions in the life insurance space.
In our submission we have put forward a number of recommendations, including the following:
- The regulatory obligations for the provision of financial advice should be proportionate to the level of complexity and risk of client detriment.
- Provision of a three-year relief period for client consent forms to allow for a standardised industry-wide system solution for the collection and transmission of these forms to be developed.
- Achievement of regulatory certainty to better enable the provision of limited scope advice, including in terms of the requirements for the fact-finding process.
- Increased regulatory certainty on the obligations with respect to a demonstration of compliance with the Best Interests Duty.
- Removal of the Best Interests Duty safe harbour and ability to demonstrate professional judgement or repeal of the “other steps” obligation and the ASIC record keeping class order.
- Fix existing issues with FDS compliance or remove the requirement to report the previous year’s fees, which are already reported in product statements.
- Greater flexibility in the use of Records of Advice, including increasing the threshold for small investments and expanding it to include small life insurance cases.
- Enable greater access to client data through the Consumer Data Right, ATO Portal, my.gov.au and Centrelink.
- Retention of upfront life insurance commissions, but increased to 80% and a reduction in the year two clawback rate.
- Support for small businesses to appoint Professional Year candidates and relaxation of some of the PY program obligations.
Whilst the consultation period has now closed with respect to the QAR Issues Paper, the review is ongoing, and we anticipate further opportunities to engage with the QAR team and to provide input on the issues in the market and the best options to solve these problems. We certainly welcome any good ideas that members might have.
Please click here to see the AFA submission to the Quality of Advice Review.
For any questions with respect to this submission, or to provide us with further suggestions on how to address the problems in the financial advice market, please email firstname.lastname@example.org.
Issued 16.06.2022. AFA Policy & Education Update