Speaking to ifa on Tuesday, CEO of the Financial Advice Association Australia (FAAA), Sarah Abood, said Financial Services Minister Stephen Jones delivered a strong response to the Quality of Advice Review (QAR).
“When you look at the way that the response is structured, what they are referring to as the stream one recommendations are very much the quick wins that we have been asking for and we think it’s a very sensible response,” Ms Abood told ifa.
“We think it will have an impact for advisers and has the potential to lower the cost of advice, and that’s really pleasing.”
Among those quick wins, or stage one recommendations, is the removal of fee disclosure statements, as well as crucial changes to the current statements of sdvice (SOAs), which will see them replaced with “fit-for-purpose” advice records.
Ms Abood also applauded the minister’s intentions to consult further on other recommendations.
“There are other recommendations in there that are bigger in terms of how the advice profession is structured, but we have said that we think we need some time and some discussion on those and that’s been heard,” she said.
Those “bigger” recommendations include the circumstances surrounding the expanded role superannuation funds are due to play in the industry.
Namely, the minister said that under stream two, super funds will expand their provision of advice, but noted that further consultation may be necessary to address questions regarding the scope of advice that can be provided by a fund, the education standards needed for an employee or representative of that fund, as well as how funds are held to an appropriate duty.
“The minister in his speech did specifically acknowledge that there were questions around, for example, what the minimum education requirements would be for people who are non-relevant providers and so on. So, we are looking forward to getting stuck into it in the next phase, with the minister’s office and Treasury,” Ms Abood said.
“I think we do need to have some more discussion around how we can make sure that advice is safeguarded for consumers, so that’s a good thing. We’re keen to get on with it to make sure that we can get those issues resolved as soon as possible,” she added.
According to Ms Abood, the FAAA will ask the minister how he intends to broaden the scope of the advice provided by funds.
“For example, will the sole purpose test be expanded to cover financial advice?” she said.
“One way you could do it, potentially, is to just define financial advice as something that can be charged to a super fund, because at the moment the fact that that advice is limited to the member’s interest in the fund is really what would get in the way to full transition to retirement style advice.”
Recommendation 6 of the QAR, penned by Michelle Levy, endorses super funds and their ability to provide advice.
Namely, Ms Levy wrote: “Superannuation fund trustees should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement.”
Moreover, she said that trustees should have the power to decide how to charge members for personal advice, and that restrictions on collective charging of fees should be removed.
However, Ms Levy proposed that advice offered by super funds be subject to the good advice duty. Namely, recommendation 4 of the QAR says that a person who provides personal advice to a retail client must provide the client with advice that is fit for purpose and is in all circumstances “good”.
But, on Tuesday, Mr Jones clarified that he will be subjecting the good advice duty to more consultation alongside the expansion of the definition of personal advice.
“Government consultation will test how these proposals might operate under different advice models, including digital advice models, and across sectors. Consultation will also consider practical policy design and implementation issues, including in relation to consumer protections,” he said.
I have the sense of an apologist. this is the most blatant carve out from the regulations. It was expounded that “we all had to lift our game” for the professionalization of the industry. One could be forgiven for thinking we have now cleary defined the hen house and let the vestiges of “acting in the best interests of the client” is a thing of the past Now we have the hen house clearly defined – lets open the gate to the foxes.
The industry takes two steps forward and one step back. Replacing SOA with fit for purpose, who decides what is fit for purpose. Getting rid of Safe Harber, there must have been something useful in it, otherwise why was it implemented in the first place. This is going to be a disaster.
But do you think that FAAA members will be pleased with your response Sarah ?
I find it unbelievable that the FAAA is out there saying Minister Jones has done well. He is planning to allow super funds to provide advice on a broader spectrum of issues than currently allowed, and for this advice to be charged to all members rather than just the member seeking advice. Furthermore, he is indicating that he will reduce the qualifications, training requirements and red-tape requirements for this advice.
Meanwhile advisers continue to get shafted.
How can FAAA members think this is beneficial to them?
Dear Sarah, Leadership and signs we have a Professional association exist where that body calls for Action and puts forward recommendations that benefits your paying members and Australians, not following the crowd where we scrap it out over 22 recommendations. The FPA formed an alliance with the FSC, put a press release saying it agreed with the recommendations and then after all of that, approached it’s members for feedback. Following that, and just prior to the merger the FPA told it’s members “it’s early days yet, plenty of time, don’t worry”…. but here we are and the only game in town is now QAR. That is not leadership, that is not how a Professional association acts.
How can Ms Abood be happy with this! Non relevant providers providing personal financial advice!!! Are you kidding me!!
Talk about one rule for them, and one rule for us. This has been a stich up from the very beginning.
Are financial advisers going to lie down again and be a political football, AGAIN!!
Its time to stand up.
Ms Abood should be speaking with members about building a war chest to take legal action against the Government.
Look out for “good advice”. Government might add safe harbour steps before taking them out , stating that these were required for “good advice”.
Overall good news especially for Super funds and adviser.
Slow-response for quick-wins… for the super funds. Ms Abood is very easy to please, indeed.
Give a little take a lot.
Can someone explain what a “fit for purpose” Advice Record looks like? Is it a Customer Advice Record, from the 1990s? If not, why not?
how quick Sarah ? oh sometime in 2024 maybe
If the FAAA thinks it is a good outcome then what could go wrong?
“LIF, I am looking in your direction”
When will tranche 1 changes become effective?