Advisers have welcomed the government’s response to the Quality of Advice Review (QAR), saying the decision to streamline ongoing document requirements will alleviate much of the red tape involved in the profession.
Among the 14 recommendations accepted by the federal government in the QAR were a consolidation of three different fee documents into one simplified document; allowing more flexibility in how financial services guides are provided; removing the safe harbour steps from the best interests duty; and replacing statements of advice (SOAs) with a fit-for-purpose advice record for consumers.
It would be part of stream one in a package of reforms. A consultation would be held with industry to determine the implications and implementation details of these recommendations.
In her recommendations, Michelle Levy had suggested there was no need for an SOA unless requested by the consumer and instead advocated for advisers to “maintain a contemporaneous record” of advice provided. She suggested the decision on the type of request or framework for providing documentation was a matter for the Australian Securities and Investments Commission (ASIC).
“It will be a matter for the provider of the advice and the [Australian Financial Services] licensee to determine what additional information is kept to evidence why the advice was good advice and, where the advice is provided by a financial adviser, why it was in the best interests of the client,” Levy said.
Jones responded in his speech on 13 June that he would “replace the unwieldy statements of advice with something that is fit for purpose”.
The government’s formal response stated “statements of advice will be replaced with an advice record that is more fit for purpose, with consultation to determine the final design of the replacement”.
The Advisers Association (TAA) chief executive, Neil Macdonald, said: “We are pleased the government is looking to remove regulatory red tape and particularly welcome the statements of advice may be replaced with an advice record that is more fit for purpose.
“SOAs are overly bureaucratic, not fit for purpose and offer little tangible benefit to consumers who often do not even fully read them.”
He suggested this measure was enacted as soon as possible.
Peter Burgess, CEO of the SMSF Association, echoed his comments in saying the SOAs are not a consumer-centric document in their current form.
“SOAs have become grossly distorted and are not a consumer-centric document,” Burgess said.
“Their content has extended well beyond the original intent and SOAs have become significantly bloated over time. They have simply become risk mitigation documents that significantly add to the cost of advice.
“Simplifying the record of advice requirements will also result in a significant reduction in the time required to prepare advice, freeing up more time for advisers to provide more relevant advice to more clients.”
Melbourne-based Viridian Financial Group welcomed the reduction in paperwork with changes in SOA requirements, adding that it had significantly increased compliance costs for advisers.
“More concise advice documents will be easier for clients to understand and will better fulfill the purpose of advice documentation, which is to explain the reason for getting advice, the strategy, and how this helps clients to meet their goals,” it said.
The Financial Services Council (FSC) agreed that financial advice had been weighed down by unnecessary and costly regulation.
“The government is right to prioritise its ‘Stream One’ reforms, which will lower the cost of providing financial advice and improve consumers’ experience when receiving advice,” said Blake Briggs, CEO of the FSC.
Stacey Cowan, head of advice sales- Midwinter at Bravura Solutions, called for the government to implement a flexible format for any future advice records.
“We agree that the maintenance of an advice record will be important to ensuring the integrity of the advice. Leading financial advice technology already offer simple and secure ways to generate file notes for customers and could be a good option for maintaining an advice record. We believe an artefact will still be required by customers and we urge the government to provide flexibility in the format of this artefact.”
The government’s final response to the Delivering Better Financial Outcomes package is expected later in 2023.
I really don’t understand all the excitement about SOA’s being replaced with an ‘Advice Record’. We haven’t been given any details whatsoever. If past experience with ASIC and Treasury is anything to go by, once they get involved, an AR will become even more cumbersome and time consuming than an SOA. Unless of course you are an unlicensed call centre jockey working for a super fund product provider. In that case an AR will consist of a recorded phone call and nothing else.