Unveiling the final tranche of Delivering Better Financial Outcomes, Minister for Financial Services, Stephen Jones, has outlined several changes regarding best interest duty and Statements of Advice (SOAs).
Speaking in Canberra on 7 December, Jones said SOAs will now be replaced by an advice record that provides information in plain English.
He said: “The record must be clear, concise and effective and actually help the client make an informed decision about the advice they have received.
“And it must address the following matters:
• The subject matter
• The advice – such as product recommendations and strategies
• The reasons for the advice – such as the information about the client that the adviser considered
• The cost of the advice to the client and any benefits received by the adviser.”
The removal of the SOA had been a recommendation made by Michelle Levy in her final Quality of Advice Review as it was her impression that a one-size-fits-all document was unsuitable. The government agreed with this but opened consultation on what the new ‘fit for purpose’ could look like.
After the government’s formal response in June, industry experts shared with Money Management what they thought the new documentation could be.
Secondly, the government will modernise best interest duty to require advisers to focus on the best interest of their client, retain the necessity for advice to be appropriate and fit-for-purpose and require advisers to give priority to their client’s interest where there may be a conflict.
This new modernised regime will apply to professional advisers, qualified advisers and digital advice.
The updated standard will provide clearer legislative support for scaled or limited scope advice where this meets the client’s objectives and needs, and for advice where the advice provider has limited, but relevant, information.
“There can be no doubt,” Jones said. “In the event of a conflict of interest, advisers will need to prioritise the interests of the client. Not themselves. And not their employer.
“Which means consumers will have confidence that all personal financial advice they receive will be held to the same duty.
“Some have suggested that the only way forward is to allow personal advice to be given that is not subject to the best interests duty. We disagree. Because Australians deserve the best, not just good.”
Finally, he will remove the safe harbour steps as he believes its process is one of the drivers that has made simple advice difficult to receive, as previously announced in June 2023.
So safe harbour is gone. Glad I studied the Corps Act so diligently for the FASEA exam.
And speaking of ‘best interests,’ if I go into one of the major banks and ask for a recommendation for an equity fund, is the ‘qualified adviser’ going to recommend another bank’s equity fund because it is better managed, has lower fees and a higher rate of return for less risk?
Same for superannuation ‘qualified advisers.’
Maybe the CoE will be the next to go because it doesn’t suit the big institutions? But we will prioritise the best interests of the client! To quote another idiot “You can’t be serious!”
Paul Robinson, bang on. The theory that product advisers (that should be the title no qualified adviser) will give impartial advice and even know what is in the marketplace outside their own brand to give an informed opinion, ensure they can’t meet the best interest duty for the client, but it sure as hell means they can meet the product best interest duty by only advising on what can be done with their fund. We’ll be back to where we were in 2019 pretty soon I’m tipping.