A report worth waiting for
After seven weeks of waiting, the final report of the Quality of Advice Review was released in early February, prompting eager reading by the advice industry.
The 267-page report had been around a year in the making with the first issues paper released last March.
This was followed by a proposals paper released in August and many, many submissions made by advisers, financial advice organisations and superannuation funds.
Now with the final report available, the industry has been able to read reviewer Michelle Levy’s 22 recommendations.
The one most immediately welcomed by advisers is likely to be her idea that there is no requirement for Statements of Advice (SOA) unless they are requested by a client.
“The obligation is to maintain a record of the personal advice – that is the recommendation or opinion about a financial product or class of financial product,” Levy noted.
“It will be a matter for the provider of the advice and the [Australian financial services] licensee to determine what additional information is kept to evidence why the advice was good advice and, where the advice is provided by a financial adviser, why it was in the best interests of the client.”
SOAs have long been the bane of advisers’ lives with frequent complaints made about their length and time-consuming nature, not withstanding whether clients’ actually read or valued them.
Even in the QOAs own survey of over 3,000 advisers states the typical length of an SOA provided by advisers was 41-80 pages compared to a desired length of 11-20 pages. Less than 3% desired an SOA of more than 40 pages.
Advisers felt SOAs should be decreased as “clients do not value them”, they “do not add value” and “too costly and time-consuming to prepare”.
The QOA Review also stated that Levy was convinced of the benefits of digital advice as a way to provide advice to 25 million Australians.
“Technology and digital advice tools have the potential to improve access to quality advice across the spectrum of financial advice for those who want and need it.”
Other recommendations from Levy included the removal of ongoing fee disclosure obligations, the requirement to comply with ‘good advice duty’ and replacing the existing best interest duty with a ‘true fiduciary alternative’.
The next stage for the report will be for the Minister for Financial Services, Stephen Jones, to share his final thoughts and any changes he wishes to make. Levy has stated there are some recommendations such as superannuation funds being able to give advice could “commence shortly” after legislation had passed while others would take longer as they require systemic change.
To quote the response of CPA Australia: “Now is the time for bravery”.
Click here to read Money Management's coverage of the report.
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