Associations divided on impact of Jones’ QAR advice reforms
While the Financial Services Council (FSC) largely supports the final tranche of Delivering Better Financial Outcomes reforms, the Financial Advice Association of Australia (FAAA) is “deeply concerned” about its negative implications on the industry.
Minister for Financial Services Stephen Jones unveiled the final response to the Quality of Advice Review on 7 December in Canberra.
Within this announcement, Jones outlined a new classification called ‘qualified advisers’ to enable licensed financial institutions including banks and insurers to provide simple advice.
“The government will expand the role of superannuation funds in providing advice to their members. Today, I can go further and announce that this model will apply across all financial institutions: superannuation funds, life and general insurers and banks,” Jones said.
Unlike bank advisers pre-Hayne Royal Commission, this new type of adviser will be prohibited from charging a fee and receiving commission.
In addition, Statements of Advice (SOAs) documents will now be replaced by an advice record that provides information in plain English.
“The record must be clear, concise and effective and actually help the client make an informed decision about the advice they have received,” Jones said.
They must also address the subject matter, the advice, the reasons for advice and the cost of advice as well as any benefits received by the adviser.
In response, numerous industry bodies have provided a mixed reaction to these frameworks to remove safe harbour steps and introduce a new class of adviser.
The FAAA painted a worrying picture, saying it could wind the clock back five years.
“There is little detail available at this stage, but on the face of it we are deeply concerned at the direction of these announcements,” said Sarah Abood, chief executive of the FAAA.
Abood believes the reforms appear to invalidate the hard work and pain involved in forming the advice profession and winning consumers’ trust.
She continued: “Specifically, the Minister has announced that any financial institution will be able to provide personal financial advice to consumers, using people who are not financial advisers – yet who would be called “qualified advisers”.
“There is no detail on the qualifications that would be required, however they would be substantially less than what is currently required to provide financial advice. Thus, the proposed term is self-contradictory and extremely likely to confuse consumers.”
While the FAAA noted some positives in the announcement, such as shorter SOAs and removing safe harbour steps, it doubled down on the confusing effect the ‘qualified advisers’ classification will have on consumers.
“We will have plenty more to say on this in the days and weeks to come. In the meantime, we will be engaging members to ensure the final legislation delivers on the intent and goals of the review, to help consumers get the high-quality financial advice they need.”
Blake Briggs, FSC chief executive, offered a differing reaction and largely supported the reforms.
He said: “The government’s policy commitment to abolish the safe harbour steps and simplify SOAs are key to reducing the excessive regulatory cost burden on financial advice.”
According to FSC research, the removal of the safe harbour steps and simplifying disclosures could potentially decrease the cost of providing advice by nearly 40 per cent.
“Superannuation funds are an important source of advice for consumers, particularly as they approach retirement, and the government’s policy has the capacity to unlock industry investment in retirement advice and low-cost digital advice solutions,” Briggs continued.
“Every consumer has unique retirement needs and the government’s recent consultation on expanding the suite of retirement income products available to consumers will not be successful without greater access to personal advice at retirement.”
Renato Mota, Insignia Financial CEO, also welcomed the government’s final response to increase the accessibility of advice.
“We know Australians are looking for affordable, accessible financial guidance and we are excited at the potential these changes have to improve financial wellbeing for more Australians,” he commented.
“We’ve needed a broad advice continuum that considers the needs of many and reaches more people. The reduction of red tape and the introduction of a new class of qualified advisers alongside professional financial advisers across all financial institutions, including superannuation funds, are the right steps forward to deliver simple advice at scale and increase accessibility.”
The Stockbrokers and Investment Advisers Association (SIAA) shared its support for banks being included in the personal advice model, as well as insurers and super funds.
“We support financial institutions as well as superannuation funds being allowed to give customers simple, quality personal advice, with safeguards built in to ensure consumer protection. We are pleased to see that the Minister also recognises the important role that digital advice will play in increasing consumer access," said Judith Fox, SIAA chief executive.
“Replacing the compliance-focused statements of advice with a consumer-focused advice record that is in plain English and provides the information the consumer needs to make an informed decision is a great step forward, as is modernising the best interests duty to ensure customers receive helpful advice, including on single or limited scope issues."