Further details on the government’s next package of advice reforms have been announced.
The advice profession has scored a victory with the government’s latest announcement, allowing licensees to charge a direct fee for advice offered by the new class of advisers.
In a statement on Tuesday night, Financial Services Minister Stephen Jones unveiled further details of the government’s second tranche of the Delivering Better Financial Outcomes package, emphasising its aim to meet Australians’ needs by expanding access to high-quality, safe and affordable financial advice.
The next tranche will:
• Create a new class of adviser to provide safe and simple advice to more Australians, such as choosing an insurance policy or basic questions about retirement.
• Modernise the best interests duty by providing legal clarity that will allow advice on single or limited scope issues if this meets the client’s needs.
• Remove the safe harbour steps so advisers can focus on their client’s needs – though well intentioned, the safe harbour steps have become interpreted to mean financial advice must always be comprehensive, even if that is not in the client’s interests.
• Reform statements of advice so they help consumers make informed decisions.
• Clarify the rules on what advice topics can be paid for through superannuation.
• Allow superannuation funds to provide helpful “nudges” to drive greater member engagement at key life stages.
The minister clarified that the new class of adviser will be restricted to providing advice on products issued by prudentially regulated entities.
“They will be prevented from providing advice on more complex topics, such as establishing a self-managed superannuation fund or advising on a managed investment scheme, through a blacklist to be prescribed in regulations,” Jones said.
This, he elaborated, will ensure these advisers focus on simple topics, while also ensuring that there is a clear boundary between the new class of advisers and professional financial advisers.
“It is the government’s vision that the new class of adviser serves as one entry-point to rebuild the financial advice profession, and the government remains committed to reforming the broader education pathways for financial advisers,” Jones said.
He also clarified that while the government anticipates some licensees will choose to indirectly charge for advice offerings, they will now have the option to charge a direct fee for services provided by the new class of advisers.
This option, championed by groups such as the Financial Advice Association Australia (FAAA), aims to enable a broader range of institutions to employ the new class of advisers, fostering neutrality across various advice models.
The minister also confirmed that the new class of adviser will be prohibited from charging ongoing fees or receiving commissions and will be held to the modernised best interests duty, aligning with the standards set for professional financial advisers.
“Anti-hawking restrictions will continue to apply, and the new class of adviser will be limited to customer-initiated engagement for new customers, ensuring they cannot be used to cold-call customers or offer unsolicited advice,” the minister said.
Licensees will also face additional monitoring and supervision obligations, backed by civil penalties, to ensure advisers operate strictly within their expertise and authorisation while adhering to the best interests duty and other requirements.
“These steps will provide greater choice and support to the millions of Australians seeking financial advice throughout their lives, while maintaining important safeguards,” Jones said.
“The government is developing exposure draft legislation for public consultation based on these announced parameters.”
It is not immediately clear when the draft legislation will be released.
