Earlier this week, Minister for Financial Services Stephen Jones released the first tranche of legislation concerning the Quality of Advice Review (QAR) – a package aimed at reducing red tape.
But, while the initial draft legislation embraced about half of the QAR recommendations, it noticeably omitted the pivotal recommendation nine – the one advisers eagerly championed – calling for the substitution of lengthy and legalistic statements of advice (SOAs) with a financial advice record for consumers that is more fit for purpose.
Speaking to ifa, CEO of the Financial Advice Association Australia (FAAA), Sarah Abood, revealed confidential discussions about the revamped SOAs are currently underway behind closed doors.
Ms Abood pointed out that the challenge with SOAs lies in their interconnected influence on other facets of advice regulation, including the Code of Ethics and the best interest provisions.
“The other issue with SOAs is that what’s in the Corps Act is important and sets the tone, and sets the scene, but the way those laws are implemented is also very important and it’s been observed by many that what’s in the Corps Act currently is not too terrible. When you read it, it seems fair enough and yet somehow, we’ve ended up with 80, sometimes 100-plus page SOAs,” Ms Abood explained.
“So, it’s also important to consider how the regulator will interpret what’s in the Corporations Act and how licensees will implement all of those matters. We’ve got to consider all of those because they’ve got to be resolved if we’re to get genuine streamlining and genuine savings in what’s going on into producing these documents”.
Ms Abood noted from her interactions with the minister that she has observed a “very genuine” intent to address and resolve this issue.
“There is a real recognition that these documents have become, you know they’re like software terms and conditions. They are these voluminous things that few people read and yet the providers are relying on to protect them, and that doesn’t help the consumer. So, it is genuine that we need to change this, and the intent is really there”.
Expressing optimism, the FAAA CEO anticipates the release of draft legislation addressing SOAs before Christmas. Additionally, she revealed that the draft is likely to incorporate changes allowing superannuation funds to potentially offer simple personal advice through non-relevant providers.
Acknowledging the disappointment voiced by advisers who feel that this week’s announcement fell short of expectations, Ms Abood emphasised that, although she shares in the disappointment, it’s crucial to view this as a “delay and not a no.”
“These changes will still be made, we just found that we need longer to get these changes right is very much what Treasury is saying. And the intent is that it is better to get it right than put draft legislation forward that’s not going to solve the problem,” Ms Abood said.
Earlier this week at a media briefing addressing the first tranche of legislation, Mr Jones said that while he deliberated over whether to delay the first tranche to incorporate SOAs, ultimately, he opted not to impede the process.
“It’s just about being entirely pragmatic. What’s ready to go, let’s get it out, don’t hold it up,” he said.
Providing additional context regarding SOAs, the minister said that the consultations are “pretty much done”.
“We’re just working through some of the technical details of it”.
While Minister Jones clarified that the exclusion of this and a few other recommendations from the first tranche of legislation would not delay their push through Parliament, he hinted that SOAs could now slot into stream two of the government’s legislative response to QAR.
“If anything, it might be the opportunity to accelerate some of the other stuff as well. For that stuff, it won’t delay. We’re always of the view that we’d get the draft legislation for stream one out this year and come back early next year with the draft legislation for stream two,” he said.
The government is consulting on the first tranche of legislation until 6 December.
So according to Abood, we can’t reduce bureaucracy because there is other bureaucracy that is interwined with the initial bureaucracy that doesn’t allow the bureaucracy to be reduced, and has been created to ensure that the initial bureaucracy cannot be reduced at the expense of the later bureaucracy.
Got it.
My interpretation is that the Corps act is reasonable, Which I would proabably agree with. The overreach is at the licensee level.
Advocacy for real advisers in Australia is pathetic and impotent
I like Sarah and the team, but if she and the FAAA can’t sort these necessary matters out for IFAs, irrespective of the degree of difficulty presented by government, then she puts the whole FAAA and many membership at risk, and our whole client base as well where they simply don’t get more value-add when they should. From a practice principal view point, we all work very hard, there is no further capacity to absorb BS and we need to tell them what it is to be done, and then go an do it. FFS. Ps I am not interested in going to FAAA Melbourne Cup soires putting money on horses when these issues circle above me, it is high time for results FAAA and your existence depends on it. Tell me the government is not the enemy now (falsely relying on DHs like ASIC and the Treasury boffins), where are the real results ?
Strategic to bundle the SOA changes in with vertical integration for the industry funds so that the legislation is supported.
Maybe the obvious and simple solution is the most appropriate, like pds’. These were previously 70 100 pgs and unreadable for consumers, then the government reduced them to 8 pages. Just legislate for SoA to only be 12 pgs, for example, and everything else can be incorporated by reference? This would reduce replicating captured info and encourage concise and engaging documents
[i]the FAAA CEO anticipates the release of draft legislation addressing SOAs before Christmas. Additionally, she revealed that the draft is likely to incorporate changes allowing superannuation funds to potentially offer simple personal advice through non-relevant providers.[/i]
As expected, Stephen Jones wanted to make sure the gift to his Industry Fund mates of making it easy for them to use backpackers to [s]flog their products[/s] provide advice was tied to the proposal to remove SOAs for educated and qualified advisers. Highly predictable. Well played Assistant Minister.
Mr Jones wants to push super changes through first so super funds can give advice without the same rules as financial planners then will give a couple of crums to the financial planners but that wont get over the line.
Afca have stated they’ll only consider whole file. Fact find captures current position risk profile goals etc. Research covers fees product comparisons and modelling covers alternatives and strategy. Why on earth does this all need to be regurgitated in an soa? It’s senseless and expensive. Mandate something very brief as the perfect soa still provides 0 protection from regulators and let us creatively focus on efficiently seeing clients with documentation we see fit for purpose with professional judgement
Exactly why Levy’s recommendation was astute. We are talking about minimum standards here NOT best practice.The notion of no mandatory documents means the voluntary SoA would be client focused and not a legalese protection against stupid over regulation.
[i][b]”the challenge with SOAs lies in their interconnected influence on other facets of advice regulation, including the Code of Ethics and the best interest provisions”[/b][/i]
Exactly, mad Govt & Bureaucratic overlapping, triplicated and more utter rubbish BS Red Tape mass over Regulation.
Regulators overlapping and their individual pedantic own interpretations via ASIC, AFCA, FARSEA, etc.
TOOOOOOOOOOO MANY REGULATORS WANTING TO DO THE SAME JOB AT LEAST 3 TIMES or MORE.
[b]Stop tinkering and start destroying the mad Govt Over Regulation Rubbish and multiple Regulators. [/b]
How about 1 single Regulator, 1 set of Rules and 1 Govt / Bureaucratic Interpretation
Sarah has hit the nail on the head. absolutely correct. the fundamental SOA design is about 12 pages, Large licensees have puffed them out way beyond the legislative intent.
Maybe the obvious and simple solution is the most appropriate, like pds, legislate they can only be 12 pgs and everything incorporated by reference?
No, they don’t even need to be 12 pages.
Should be possible to have 1 page on super changes, 1 pages on investments, etc. It should be an executive summary, not a complete history.