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.
The Financial Services portfolio continues to produce arguably the worst ministers, regardless of who is in government.
We don’t even get good politicians.
An absolute disgrace, mortgage brokers were also mentioned in the RC to rein in the hidden comms they receive when the sell loans, but they got out scot free !
They should all go work for industry funds and appoint a Minister capable of understanding clear vernacular so Australians don’t deal with Qualified Advisers who are in fact the least qualified.
How would one prove they have provided advice in the best interests of the client without the safe harbour steps? Wouldn’t the process to provide advice in the client best interests likely follow a similar process as what we have now, by following the safe harbour steps? I thought this was why Levy recommended ‘good advice duty.’ I can’t see how this change actually saves much time.
current governmennt is bought out by industry funds. jones is not driven by consumers interests. his meetings are with money bags holders. conflict of interest is rife. clear as day. plenty of donations coming labors coffer. fincnail planners qualificaitons not worth paper its written on.why? clients will view see “qualified advisers” the same dirty brush.
Please ask Minister Jones to read APRA’s Superannuation Practice Guide SPG530 issued in July 2023. Its only reference to advice is an adviser to the trustees only. The “the good advice recommendation from the QAR final report” was completely ignored by APRA and SPG530 conflicts with the best interests of members. Secondly, corporate lawyers in financial institutions stated in emails to me that ASIC Regulations applying to financial advisers are not Law and not relevant to financial institution’s product providers. In the hierarchy of Law, financial institutions completely ignore regulatory obligations on financial advisors and ASIC avoids supporting advisers when a financial institution blocks advisers are trying to perform the clients’ best interests duty. These gaps in Industry Regulatory Governance have been in existence since 2013 and the Minister does not understand his own “mega silos regulators that do not work” (quote Professor Johanna Weaver, ANU College of Law, 3 October 2023 witness statement before Senate Economics References Committee)
Yes, and the best is “free”, according to Jones new class of ‘qualified adviser’. And Father Xmas is just around the corner kiddies.