Quality of Advice Review Consultation Paper

AFA News 8 September 2022. On 29 August 2022, Treasury issued the Quality of Advice Review Consultation paper- Proposals for Reform.  This Treasury webpage also includes a link to a Webinar conducted by Michelle Levy, the Independent reviewer on the Quality of Advice Review.  This webinar helps to explain exactly what she is recommending and why.

This proposal paper has floated some potentially substantial changes for the financial advice sector.  There are some proposals that advisers will embrace with both arms.  There are other recommendations that you will most likely ponder over and possibly have concerns about.  This has been put forward as a package of reforms.  It is also important to understand that the objective of this review is to look at measures to improve the accessibility and affordability of financial advice.  Not all of the solutions to this challenge apply to financial advisers.  Michelle Levy has also made proposals that will make it much easier for product providers, including superannuation funds and life insurers to provide financial advice.

They have issued these proposals for consultation.  They are seeking feedback from stakeholders, and this will influence the final recommendations.  Ultimately it is up to the Government to decide what changes they will make to the financial advice regulatory regime.

The specific proposals in this paper include the following:

  1. Broadening the definition of personal advice to include situations where the provider has or holds information on the client.
  2. Remove general advice from the regulatory regime.
  3. Replace the Best Interests Duty and related obligations with an obligation to provide good advice.
  4. Restrict the provision of advice by relevant providers when provided by an individual and where the client pays for the advice (including a commission) or there is an ongoing advice relationship. It is only advice provided by a relevant provider that is subject to the professional standards obligations.
  5. Broaden the scope of advice that can be provided by super fund trustees.
  6. Remove the restrictions on collective charging of fees in super funds (intra-fund advice).
  7. Legislate to specifically permit advice fees to be paid from superannuation accounts.
  8. Repeal Fee Disclosure Statements and rationalise renewal and client consent obligations.
  9. Remove the requirement to provide Statements of Advice and Records of Advice (however records would still need to be kept).
  10. Permit Financial Service Guides to be available to clients on websites.
  11. Remove significant dealing and regular reporting (other than complaints) obligations for financial advisers under the Design and Distribution Obligations regime.
  12. Provide an adequate transition period and enable early opt-in.

Some of these changes are revolutionary.  It does take some time to think about what the new world might look like and to come to terms with the implications, such as not providing SoAs.  This certainly does not mean that advisers would not provide written advice, however they could choose exactly how they would do this.

Please make sure that you read the consultation paper and watch the webinar.  We welcome your feedback on these proposals.  Don’t hesitate to tell us what you like and what you don’t like.  Also please let us know how you think these proposals can be improved.

For any questions on the Quality of Advice Consultation paper, please email policy@afa.asn.au.

Issued 08.09.2022. AFA Policy & Education Update