Financial Services Minister Stephen Jones announced the government’s Quality of Advice Review (QAR) response on Tuesday morning and revealed that the government accepts in principle 14 of the 22 recommendations.
His announcement has been broadly welcomed, with the CEO of the Financial Advice Association Australia (FAAA) applauding the response shortly after it was delivered at a private ASFA event.
Speaking to ifa, Sarah Abood said she is overall “very pleased”, particularly with the minister’s package of quick wins.
Similarly, the Financial Services Council (FSC) welcomed the minister’s response in a statement and applauded the quick wins.
“The government is right to prioritise its ‘stream one’ reforms, which will lower the cost of providing financial advice and improve consumers’ experience when receiving advice,” said the CEO of the FSC, Blake Briggs.
“The FSC looks forward to working with the government to deliver on its commitment to introduce legislation implementing these changes before the end of this year, including strengthening consumer protections by tightening exemptions to the ban on conflicted remuneration and standardising consumer consents for determining a ‘sophisticated’ client.”
But unlike the FAAA, which welcomed the minister’s commitment to further consult on how the role of superannuation funds will be expanded, Mr Briggs warned that the government is “at risk” of “unnecessarily restricting” the number of institutions that can invest in new advice solutions if it only heeds the QAR recommendation regarding funds and leaves out the banks and other institutions.
Namely, in his QAR response, the minister pointed out that he is not yet ready to welcome the banks into advice.
Instead, he said, the government will further examine the role for other institutions — banks and insurers — in providing more information and advice.
“Superannuation funds will play an important role in providing retirement advice, however if the government narrowly implements key reforms, they could fail to attract the industry investment that is necessary to deliver quality advice to the millions of Australians that would benefit from it at different stages of life,” Mr Briggs said.
“The Quality of Advice Review’s recommendations for a ‘good advice’ duty and allowing ‘non-relevant providers’ to provide personal advice were designed to have broad application beyond the superannuation sector, to encourage industry investment and ensure a level, competitive playing field.”
Meanwhile, ASFA expectedly applauded the minister’s announcement, highlighting, in particular, the reforms that allow super funds to provide more advice to their members.
“These reforms will improve access to financial advice and retirement outcomes. They will also increase the efficiency, cost-effectiveness, and consumer experience of advice,” said ASFA deputy CEO Glen McCrea.
“Superannuation funds are well placed to deliver the financial advice that consumers want and need. This can range from relatively simple advice around a single issue such as contributions or investment options, to more holistic advice around retirement,” Mr McCrea added.
Devout supporters of the minister, the Association of Independently Owned Financial Professionals (AIOFP), also welcomed his response.
“We suggested from the QAR beginning that Minister Jones will cherry pick the ‘no brainers’ and bin the rest, which has happened,” said executive director, Peter Johnston, in an email to the AIOFP member base made available to ifa.
“Addressing the SOA and consent forms in stage 1 is critical to mitigating red tape and the ‘10-year rule’ goes into Parliament next week, great practical outcomes for all stakeholders,” Mr Johnston opined.
He also revealed that the good advice duty is likely to remain — despite the minister confirming he would consult on it further — but only in certain circumstances.
“It may just be for the superannuation fund employees who dispense product information, but that is my guess. I asked a direct question during the question time on this but did not get a direct answer,” said Mr Johnston.
In his response to the minister’s announcement, Insignia Financial’s CEO, Renato Mota, said, “these measures will improve the ability to access affordable and quality advice and information from advisers and their superannuation fund”.
“With Australia’s ageing population, it’s important we work together to address their needs as they approach retirement. We look forward to working with the government to make a positive difference to the financial wellbeing of Australians”.
Meanwhile, the CEO of WT Financial Group Keith Cullen said: “We absolutely support the need for super funds to be able to provide simple episodic and transactional advice — the appropriate guard rails will be imperative”.
[i]“Superannuation funds will play an important role in providing retirement advice, however if the government narrowly implements key reforms they could fail to attract the industry investment that is necessary to deliver quality advice to the millions of Australians that would benefit from it at different stages of life,” Mr Briggs said.[/i]
What he meant was banks should be allowed to build a system that directs people to buy their products…and we know from past experience that banks always look after their customers.
I am amazed at the verbal flexibility of Peter Johnston. Today he is talking in terms of “great practical outcomes for all stakeholders” from the QAR. On 3 February this year he also said in an email to his distribution list “The AIOFP chose to not support the LEVY QAR from the beginning”. That wasn’t all he said about Michelle Levy, and the rest wasn’t pleasant. They say that success has many parents but failure is an orphan. For someone who was opposed to the QAR from the start, and never engaged in the process, Peter Johnston would be the only one who would have the intellectual flexibility to now claim responsibility for the success.
Thanks Jonesy! Without SoA I can see more clients and implement quicker
So the experience carve out has now been granted in theory as well as a cut down of compliance and paperwork if the announcements are correct.
Unfortunately, we have always been an industry of carveouts and grandfathering, all at the expense of professionalism.
All “carve outs and grandfathering” do is to distort the true education standards of the industry, stifle any inroads to professionalism, and allows all the regulators, and vested industry groups to decry the lack of professionalism and education standards when there is one of the many reviews that seemingly occur at regular intervals, which inevitably leads to more compliance, more regulation and recently the Fasea exam and education standards, and the cycle continues.
Vertical integration, banks, sales models etc were the past main causes and who to say the future causes may still be vertical integration from the industry and super funds giving advice, or MDA providers perhaps and from the lower educated depending on what is approved.
The restricted term “Financial Planner etc” was brought in for the primary object was to restrict this to those authorised to provide financial advice and be listed on the ASIC register and also for consumer protection.
QAR and Minister Jones is now allowing Super funds etc will be able to provide scoped, scaled, or limited advice. If they meet the criteria above, then they will be able to use the restricted term as well.
The restriction of the term should only be for those that are on the ASIC register and fully meet the Fasea education standards. Otherwise, we are back to the handout of CFPs again from past times where no one can tell the difference especially the very people where the protection is needed being the consumers.
For those that don’t meet the Fasea education and thereby not being able to use the restricted term but are on the ASIC register, then there needs to be a term for them. This is like Lawyer and Conveyancer.
Why not have a secondary term like “Associate” or “intermediate” or “Affiliate” as a prefix or postfix to Financial Planner/adviser.
If there is a planning group created that will be factored around the experience pathway, then they should not be allowed to use the restricted terms.
Otherwise, it will all end up like the CFP again where we can claim the same level, but the disparity is confusing and wide.
And when there is an issue, we will be grouped as “financial planners”.
Until collective vertically integrated “IntraFund Advice” is banned, nothing will change. It is a hidden product based racket & always has been.