The government has announced it will adopt the bulk of Quality of Advice Review (QAR) recommendations to improve accessibility to reliable and affordable financial advice, which has been largely welcomed by industry bodies.
At a gathering of industry executives, Minister for Financial Services, Stephen Jones, announced it would accept some 14 of the 22 recommendations in the QAR.
“There are 5 million Australians approaching retirement that need assistance navigating the pension and superannuation systems,” Jones said.
“These reforms aim to address the high cost of advice, better protect consumers, bolster ethical standards and ensure Australians can access helpful information that could make a meaningful difference to their quality of life in retirement.”
The recommendations were broken down into three streams: removing regulatory red tape that adds to the cost of advice without benefiting consumers; expanding access to retirement income advice; and exploring new channels to advice.
“We are particularly pleased to see the support for recommendations such as the removal of fee disclosure statements, rationalisation of fee consent, removal of the best interests duty safe harbour steps and in-principle support for a major overhaul of financial advice documentation,” said Sarah Abood, chief executive of the Financial Advice Association of Australia (FAAA).
“These Phase 1 responses show that the concerns of our sector have been heard. It is a sensible package that will alleviate much of the unnecessary red tape involved in providing financial advice.”
She considered the reforms a “big step forward” towards helping advisers deliver more advice for Australians and welcomed further consultation, such as the decision to open advice to super funds.
“The government has signalled it is open to discussion on matters such as the minimum education requirements for super fund employees and representatives, the scope of the advice and the duty that advice would need to meet,” she said.
“We support the sensible consideration of these further recommendations and will work constructively with the government in this next phase of consultation.”
Insignia Financial CEO, Renato Mota, also welcomed the announcement for putting consumers front and centre.
“As Australians are struggling financially and needing assistance, these measures will improve the ability to access affordable and quality advice and information from advisers and their superannuation fund,” Mota said.
“With Australia’s ageing population it’s important we work together to address their needs as they approach retirement. We look forward to working with the government to make a positive difference to the financial wellbeing of Australians.”
According to Vanguard Australia managing director, Daniel Shrimski, there was “room for a diverse range of advice and guidance options” to support Australians’ financial outcomes.
“Super funds are particularly well placed to help Australians receive affordable guidance and simple advice for their retirement, with the highest prudential standards and consumer protection regulations. However as our How Australia Retires report also shows superannuation represents about half of Australians’ retirement wealth and so advice needs to support a confident retirement both inside and outside super,” he said.
“Removing some of the key efficiency barriers to adviser practices and expanding the ability for super funds to provide advice are important developments, and we believe even more progress can be made beyond this to ensure Australians receive affordable advice suited to their needs in the future.”
The Financial Services Council (FSC) said the government was right to prioritise the first stream of reforms that would streamline the financial advice process. Last week, the organisation had held a panel with industry experts to discuss what they would like to see in the report.
Blake Briggs, FSC chief executive, said: “Financial advice is weighed down by unnecessary and costly regulation and documentation requirements that can be simplified to improve the quality of advice provided to consumers.
“The government is right to prioritise its ‘Steam One’ reforms, which will lower the cost of providing financial advice and improve consumers’ experience when receiving advice.
“Just 10 per cent of the adult population receive advice and the regulatory burden has pushed the cost of delivering advice to around $5,000.
“The FSC looks forward to working with the government to deliver on its commitment to introduce legislation implementing these changes before the end of this year, including strengthening consumer protections by tightening exemptions to the ban on conflicted remuneration and standardising consumer consents for determining a ‘sophisticated’ client.”
However, the industry body encouraged the government to remain open to applying QAR recommendations beyond the superannuation sector. Jones has stated he will consider the remaining recommendations by the end of the year.
“In its second and third streams the government is at risk of unnecessarily restricting the number of institutions that can invest in new advice solutions, which could result in too many Australians missing out on quality financial advice at key stages of life,” Briggs said.
“Superannuation funds will play an important role in providing retirement advice, however if the government narrowly implements key reforms they could fail to attract the industry investment that is necessary to deliver quality advice to the millions of Australians that would benefit from it at different stages of life.
“The Quality of Advice Review’s recommendations for a ‘good advice’ duty and allowing ‘non-relevant providers’ to provide personal advice were designed to have broad application beyond the superannuation sector, to encourage industry investment and ensure a level, competitive playing field.”
Government consultation was expected to test how the proposals might operate under different advice models, including digital advice models, and across sectors.
It would also consider practical policy design and implementation issues, including in relation to consumer protections.
The final response on the Delivering Better Financial Outcomes package was expected later in 2023.
I’m a mature adviser with 45 years of experience in Financial Services with several General Management role in Life Insurance Companies, Financial Planning Businesses and Retail Banks. I have been a Financial Planner for 21 years.
I have no objection to other than licensed advisors giving advice, so long as, for whatever type of advice we are providing it requires the same education, documentation and liability. Simplistically, if giving interfund advice which almost certainly will involve some level of personal details, we should have the same requirements as a superannuation fund employee/adviser, otherwise this just becomes a penalty for going through the whole education/professionalism process. In addition, having advice costs charged against a fund, rather than the individuals account, in my view, discriminates against those members who choose to have their advice provided by an external entity.