‘Australians deserve the best, not just good’, says Jones, but will they get it?

In addition to proposing a new statutory best interests duty exclusively for financial advisers, independent chair of the Quality of Advice Review (QAR) Michelle Levy also backed the imposition of a separate “good advice duty” under recommendation four of her final report.

This new obligation, which she recommended be enshrined in the Corporations Act, would have applied to all providers of personal advice to retail clients, and was, according to Ms Levy’s earlier comments, the crux of the QAR.

On many occasions, Ms Levy insisted that for institutions to give good advice, the good advice duty needed to be put into practice.

Namely, Ms Levy argued that implementing a duty of good advice could effectively reconcile the conflict between the two obligations currently confronting super funds - a duty to act in the best interests of the members as a collective, and the duty to act in the best interests of individual members.

But, in delivering the government’s final response to the QAR, Financial Services Minister Stephen Jones said that “Australians deserve the best, not just good”, putting a clear full stop on the good advice debate.

The minister did, however, announce that the government intends to introduce a 'modernised and flexible' best interests duty that will ensure all personal advice, whether it is given by a professional adviser or Mr Jones’ new class of “qualified advisers”, is provided under a single, uniform quality standard.

Under the government’s proposal, the new duty will maintain the existing obligations to act in the best interests of the client and to prioritise the interests of the client in the event of a conflict, but will provide clearer legislative support for scaled or limited scope advice or where the advice provider has limited, but relevant, information. It will also remove the 'safe harbour' steps.

Commenting on the Mr Jones’ announcement, law firm Allens, where Ms Levy herself is a partner, said that this revised duty could, if drafted accordingly, permit advice providers to give advice on only one or a few topics where this meets the client’s objectives and needs, and allow advice providers to base that advice on relevant information without the need to complete an exhaustive fact-find in every situation.

This would ultimately give advice providers more flexibility to give advice that is scaled or limited to specific topics, provided it is fit for purpose and appropriate in the circumstances.

On the ‘safe harbour’ removal, Allens said that its removal “may” free up advisers to adopt different processes for satisfying the best interests duty in producing advice.

“This could make it more feasible to provide advice through digital and other channels where a detailed fact-find may not be appropriate or possible.

“However, whether the reforms will in fact enable providers to give more simple personal advice to more people and reduce the complexity of complying with the obligations will ultimately depend on how the revised obligations are framed in the legislation and what they require of advisers. We will need to wait to see the draft legislation to know whether the good intentions are translated”.

Ms Levy’s view was that implementing the good advice recommendation from the QAR final report would help increase protections for consumers.

“A duty to give good advice is not, and is not intended to be a duty to give ‘OK’ advice or ‘good enough’ advice,” Ms Levy previously said.

Mr Jones has, however, argued that stringent regulations already govern superannuation funds, which mandate that they act in the best interests of their members.

But, when it comes to banks, Mr Jones has yet to explain how consumers can be confident that the advice they’re receiving from their banks is in their best interests, given that he has previously explicitly said that he recognises a clear difference between the obligations that govern funds and banks.