On an upcoming episode of Relative Return, the new podcast by Momentum Media, Mayflower Consulting chief executive officer Sarah Penn was asked if she thought the government could take no action at all on the Quality of Advice Review (QAR).
“At the moment, that is a definite possibility, I’m sorry to say, just because there is so much going on,” Ms Penn said. “The government is trying to boil the ocean in terms of all of the changes they are making to everything in financial services.
“There is a lot of good intent, but how it will all play out is questionable,” she said.
Ms Penn, who works alongside financial advice groups, fund managers, and super funds as a consultant, suspects that Michelle Levy’s recommendation to scrap Statements of Advice (SoAs) was a major curveball for the government.
“When the government commissioned the review, they had no idea that Michelle Levy was going to come out at the end of it and say you should get rid of Statements of Advice,” she said.
“I think what has happened — and this is absolute conjecture — is that the government read the report, saw that it said get rid of SoAs, and they didn’t even know where to start with it.”
Ms Penn believes SoAs should be scrapped, saying they add no value to the quality of financial advice.
“It is the right time to get rid of the SoA. But whether the government will be able to do it or if it just gets replaced by another piece of paper remains to be seen,” she said.
A core part of Ms Penn’s business is working with clients to produce Product Disclose Statements (PDSs), which she says are only ready by consumers when they are upset, stressed or grieving.
She has seen the PDS evolve from seven-page “Key Feature Statements” in the early 2000s to long, legalistic documents to their current format, which is closer to the early 2000s example.
The former Macquarie director believes SoAs will have a similar fate of undergoing a series of changes before arriving back in their original state.
Meanwhile, BT Financial CEO Matt Rady told ifa, removing SoAs will relieve a significant burden on advisers.
“Ultimately, if adopted, the recommendations should make advice more affordable, largely from the reduced burden that accompanies the production of an SoA,” Mr Rady said.
“Not only are we talking about reduced cost, but reduced time to serve, which means more ability to serve more clients. This increase in ‘supply’ of financial advice services can also help to reduce costs overall.”
BT head of financial literacy and advocacy Bryan Ashenden told ifa that in their current format, SoAs are lengthy and legalistic.
“In its current form, it doesn’t meet the Corporations Act requirements of being clear, concise, and effective,” Mr Ashenden said.
“Notably, the report’s recommendation requires an adviser to ask their client if they want something documented, and provide it if they do. We believe the requirement to provide something will be part of any legislated change here. But the key will be ‘what’ it contains and ‘how’ it looks.”
Mr Ashenden said one of the key benefits of removing the SoA requirement is that it will allow for greater flexibility and innovation in the way advice is delivered.
This includes different forms of communication, such as PowerPoint presentations, videos, or animated presentations, which help to make financial advice more engaging and accessible to a wider range of clients.
“Matt Rady told ifa, removing SoAs will relieve a significant burden on advisers” which is probably Jones is dragging his heels, last thing he wants to do is reduce the workload advantage product providers have over Advisers
I’m reminded of the saying “One thing a consultant will never tell you, is to stop employing consultants”
Gee imagine that, a Government review who commission reviews but don’t act…!!!???? What would the odds of that be? Oh wait…. like 90%?….
If Jones does nothing or just looks after industry funds he’ll be out along with Labor. Get rid of SoA.
How does Pete and the AIOFP feel about this….they were actively pushing Jones as the ‘savior’ of financial services prior to the Federal election…. are their calls still being returned now that he is minister?
Customer Advice Records. Clear, concise and effective. Everything since has been a monumental step backwards. Why?
Most clients read a CAR, the documentation since, is read by less than 2% of clients. Teachers and Engineers. Otherwise they are only reviewed in the event of a complaint.
Instead of this industry being run the lawyers and compliance boffins and documents being prepared for lawyers and complaints teams, it should be run for clients.
totally agree P
They don’t need to get rid of the SOA, just stop being so prescriptive about it.
Ms Penn. Sorry to burst you bubble but SOA’s in some cases do add value for a client. They would add even more value if we condensed them by removing some of the fluff…
What we need to do is get rid of the ridiculous Annual Fee Renewal Consent form, which is incredibly bureaucratic red tape that doesn’t exist in any other nation on earth, plus move from SoAs to the former 2-page Customer Advice Records (from the 1990s). These two reforms are the key initiatives that are going to help the 1 million orphans floating around on the investment platforms get access to retail financial advice.
SOA’s that meet the Corporations Act of being clear, concise and effective would be reasonable for the adviser to produce and simple for the client to read. It’s a shame that ASIC, AFCA and when it was around FASEA made these insufficient for the compliance departments. This industry (it’s not a profession whilst you don’t need to complete education on the basis you have 10 years experience) is just a joke and getting worse by the day.
To be honest Stephen Jones was the worst outcome for our industry as Minister. He has a long track record of never making a decision on anything.
If this is the lesser of two evils, then I’ll take Jones over Jane Hume any day of the week!
The only parts of the QAR that will be implemented by the ALP will be the ones to directly benefit their union fund masters. Everything else will be ignored as Jones isn’t interested in helping clients/consumers, only his buddies.
More sales people trying to tell us how to generate more claims against advisers.
That is where vertical integration, and product manufacturers generally, demonstrate why they should be excluded from the process.
Clients need something simple and concise, as the act provides, they certainly don’t need nothing at all.
I completely agree that clients need something simple and concise, which is why we should get rid of SOAs. You as the adviser should be able to decide how best to communicate to your clients, you don’t need ASIC telling you.
Goodness gracious! lost for words.
What a surprise, I wonder how much the industry super funds are lining jones pocket
Yes and especially since he is fast tracking the approvals to allow industry funds to provide advice. ‘Nothing new under the sun’.