Jones unveils final QAR reforms

Unveiling the final tranche of the Delivering Better Financial Outcomes reforms, Minister for Financial Services Stephen Jones has added banks back into the equation with a new classification of ‘qualified adviser’.

Speaking in Canberra on 7 December, Jones said there will continue to be a role for professional advisers but that they cannot scale up their model to reach the millions of consumers who need advice. 

With this in mind, he has already outlined a way for super funds to provide advice to their members in his initial recommendations and has now indicated this will also apply to banks.

He said: “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.

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“This is a pragmatic step that will expand the provision of personal advice to improve consumer outcomes.”

The existing concessional treatment for personal advice provided by banks and general insurers on defined basic products will be maintained.

The idea of banks being included as a way to boost the provision of advice was first mooted in an industry panel held in June where leaders including HUB24 managing director Andrew Alcock and former abrdn managing director, Brett Jollie, called for banks’ inclusion.

“Broadening the base of super funds will help but it needs to be broader, what about purely investment advice, there has to be a role for banks in this. That has been controversial in the past but the guard-rails have changed and there’s a role to be played there,” Jollie said at the time.

When the government’s formal response came out a few days later, Jones said banks were an area it was exploring but initially stopped short of formally including them in the response in favour of trialling it with super funds first.

In order to populate these advisers at super funds, insurers and banks, Jones has introduced a new classification called ‘qualified advisers’, those employees of licensed financial institutions who are restricted to providing simple advice.

This will enable these financial institutions to provide advice at scale to Australian consumers.

Unlike bank advisers pre-Hayne Royal Commission, this new type of adviser will be prohibited from receiving commission.

“On scope, qualified advisers will focus on providing simple financial advice. On fees, qualified advisers will be prohibited from charging a fee and from receiving a commission, which will help to restrict their advice to simple advice. 
 
“And on qualifications, as the name suggests, they will be required to meet a government-mandated education standard. The exact level of education will be determined in time, but a minimum standard of a diploma may be the right balance to be less onerous than the requirements for professional advisers.”

Statements of Advice

Moving into the regulatory requirements for financial advisers, Jones expanded on the future of Statements of Advice (SOA) documents, an area that had been excluded from the first tranche of legislation last month. 

SOAs will now be replaced by an advice record that provides information in plain English.

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’ advice document could look like.

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.”