Behind closed doors on Tuesday morning, Financial Services Minister Stephen Jones unveiled the government’s anticipated response to the Quality of Advice Review (QAR).
Speaking to a small audience of superannuation fund CEOs and senior industry executives, Mr Jones revealed the government will accept 14 of the 22 recommendations made by QAR lead Michelle Levy.
“There are also some problems that have a ready-made answer. Others are tougher nuts to crack,” Mr Jones told an ASFA breakfast.
“And so, I think we can move quickly on the former, while working together to solve the latter.
“With this in mind, I am pleased to announce that the government will adopt the bulk of the review’s recommendations immediately, with legislation to come in the second half of 2023 and early 2024.”
The government’s legislative response to the QAR will be divided into three streams, according to the minister’s speech seen by ifa.
Under stream one, Mr Jones said the government intends to scrap fee disclosure statements, while replacing statements of advice (SOAs) with “fit-for-purpose” advice records.
Also under this initial stream, the government will eliminate the safe harbour steps from the best interests duty, consolidate the ongoing fee renewal and consent requirements into a single form, and introduce standardised consumer consent requirements to classify a consumer as a wholesale or sophisticated client.
Moreover, the government will simplify certain exemptions to the ban on conflicted remuneration, while removing others, and introduce standardised consumer consent requirements for life, general, and consumer credit insurance commissions.
“The first stream of work will streamline the process of giving advice through current channels,” Mr Jones said.
Citing “weaknesses in the current regulatory framework”, the minister said, “with each superfluous rule, the cost of providing advice has increased”.
Stream two of the reforms — dubbed the “expanding access to retirement income advice” stream — will see superannuation funds expand their provision of advice, with Mr Jones vowing to remove restrictions on collective charging of members for advice.
Moreover, superannuation trustees will be provided with legal clarity around current practices for the payment of adviser service fees.
Expounding on the government’s thought process, Mr Jones said funds “must play” an expanded and more effective role that serves the needs of their members.
“In fact, government has already told them they need to do more,” the minister said.
Mr Jones stressed that super funds are “well-suited to safely meeting the needs of their members”.
“They are already governed by strong obligations to act in the best financial interests of members and act for the sole purpose of providing retirement benefits to members.”
The minister, however, clarified 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.
“We are open to tailoring that model as necessary based on feedback from industry and Treasury’s advice to make sure it leads to meaningful outcomes for members,” the minister said.
“In the coming weeks, Treasury will work with industry to finalise the details for how these recommendations can be effectively implemented.”
‘Good advice’ placed on ice
The remaining eight recommendations, Mr Jones confirmed, will be placed under further scrutiny, including recommendation one that proposes a broader definition of personal advice, the introduction of a good advice duty (recommendation 4) and the removal of the obligation to give a general advice warning (recommendation 2).
The final stream will also examine the role of other institutions — banks and insurers — in providing more information and advice.
Mr Jones conceded that he is “just not compelled” that the same urgency exists in these “other” spaces.
“There is also a difference between the obligations that cover these institutions and superannuation funds,” he said regarding the return of banks to advice.
“And so, I’m not compelled that the model that has been proposed in the review is fit-for-purpose for these other sectors as is, even where there is a need.”
Noting that the review has “given us some principles to guide the conversation”, Mr Jones stressed that “right now, more is needed to get it to the point that it can make a meaningful difference”.
The minister added, however, that the government is “not ruling out any recommendations” and “will finalise our position on the remaining recommendations before the end of the year”.
The government is also due to consult on the design of the replacement for SOAs.
ifa last week revealed that a small audience of superannuation fund CEOs and senior industry executives would be the first to hear the government’s response to the QAR at an exclusive event organised by the peak body for the super industry ASFA.
The government’s response to the QAR has been highly anticipated by the 16,000 financial advisers operating in the industry.
I’m yet to see anything in the Quality of Advice Review about actually improving the quality of advice. Most of the discussion has been about accessibility and streamlining compliance. Perhaps it is a misnomer?
some commonsense finally, the duplication and red tape has been absurd
If anyone truly believes that “no more SoA’s” is going to provide any efficiencies, think again. Your file is still going to have to have all of that information in it, and I guarantee PI insurers will want it all signed off by the client. It’ll end up an SoA with a different name.
Really that’s it??? we have been shafted again, there is no end to this roller coaster ride no wonder there are 16000 advisers left, who can complete with the bullshit that this government dishes out. Looking after their union mates again!! Anyone who understands advice knows that it involves a holistic approach, which means that you can’t just look at someone’s super fund to make decisions about their retirement, you must consider other assets as a whole otherwise you are not serving the client or putting them in a better position!!!!
Advisers who voted for him (Labour Government) shouldn’t complain.
I am not too concerned about super fund providing advice. One of the reason why people choose to have a financial adviser is because they cannot do transaction over the phone & explaining complex strategies over the phone !!! GOOD LUCK.
Client wants someone who they can sit in a room and have a conversation with them rather than over the phone. Until baby boomers are alive the face to face model will always win!!!
Intra fund advice model adds 0 value to the client because intra fund advice is a scripted advice.
Superfund have the volume but given their capacity unless they go on a mass hiring blitz they wont be able to deliver a competitive advice model.
Interesting times ahead !!!!
On the positive side, I honestly thought at one stage that the best that would come out of this is FSGs on webistes.
So have a royal commission to remove commissions from all advisers (send some broke), wait a few years and then say banks and super funds it’s all good, you can charge however you wish, including via collective (fee for no service) charging, you don’t have to do SoA’s nor do you have to meet any of the safe harbour steps. Wow sounds like a great plan for BIG institutions.
It is amazing that Sarah Abood from FAAA has come out in support of Jones’ pandering to teh Big Super Funds.
No matter the structure, the FPA is always in agreement with the government and fails to confront them on behalf of their members.
The real problem of course are the advisers who maintain membership of the FPA/FAAA and thereby give them credibility. Akin to the Turkey voting for Christmas.
As expected ALP / Jonesy gifts the Industry Super Funds the green light to Flog more product with effectively zero compliance, via vertically owned call center jockey’s with no education, no qualifications and ALL charged via HIDDEN COMMISSIONS charged to every member of Industry Super when 90% will pay Hidden Commissions for NO sales Advice.
love to know what the Ms Levy thinks about this and the carve out from quality it provides? but wait she has been duped
The latest headline by the IFA re Jones’ approval of 14 of the 22 ‘reforms’ after the QAR, and in particular reading that Sarah Abood fully supports these ‘quick’ wins, has seen me resign from the FAAA.
Anyone who believes that these ‘quick wins’ are good for the advice industry, that is the “relevant provider’, is either kidding themselves or delusional, and I include Abood in this assessment.
I have said, since the QAR was first vaunted, that it [QAR] has nothing to do with the personal advice industry. It is purely to get the banks, instos and industry superfunds back in the game, under the guise of ‘affordable advice’.
Moreover I wrote to Treasury with my concern that the QAR was pointless to the personal advice industry as long as the Code was in its current form. Their [Treasury] reply was to inform me that the Code would be looked at in 2023 (still waiting). It was obvious at that point nearly two years ago, what it [QAR] advice sector it was targeting.
These reforms, brought about through the QAR, means that banks, instos and industry superfunds, can no longer be held accountable for lack lustre or even poor advice.
On the flip side though, for us, the opposite is true.
The Code of Ethics means that no advice Licensee MUST continue to use the SoA as an advice document for retail clients.
However, the change that worries and disturbs me is the removal of the ‘safe harbour’ test for advice delivered to the client in the retail advice world.
ASIC uses the ‘safe harbour rules’ to measure the compliance of advice delivered to the retail client (SoA).
So what do you think ASIC might use now to measure an advice document delivered to a retail client by a ‘relevant provider’?
The only piece of legislation that points to how to provide advice, how it should be delivered and what the adviser needs to consider ..the Code of Ethics.
So, it is quite clear that advocacy from the FAAA only exists for the instos, banks and industry superfunds, not the retail advice licensee, and until the Code is changed, nothing will change for the advice licensee with ‘relevant providers’, while banks, intos and industry superfunds get to provide ‘advice’ as employees I.E ‘NON – relevant advisers’ able to say and flog anything…with impunity.
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”.
However will ASIC catch out individual advisers to publicly scalp (ie name & shame) if they don’t have SoAs to pick on anymore?
Really sensible changes to useless admin for FP, thanks Jonesy better than Liberal already!
Stream 1 sounds positive but realistically SOA’s are 50 plus pages because licensees and advisers are scared of being sued. Unless this changes the paperwork involved won’t change.
Stream 2 — Free kick to their industry super mates.
Stream 3 — Let’s keep the banks on the sidelines to let our mates in Industry Super provide advice for no charge.
Until the Code of Ethics is changed to a workable Code, NOTHING will change insofar as SoAs.
Worse still is the removal of the “safe harbour” test. This was not removed to help the adviser, it has been removed so that the instos and superfunds can have carte’ blanc on flogging their products and what they consider to be “advice”.
The removal of the safe harbour test is particularly disturbing because it means that ASIC are likely to now look to the code as a test.
FIT for advice records and removal of safe harbor is a big step backwards for the industry wanting to provide efficient and consistent delivery of advice standards.
I note there are lots of negative comments here about the increased scope for super funds. Am I the only one that thinks the scrapping of FDSs and SOAs as well as streamlined annual consent is a big positive. If we continue offering our clients a great service (and doing more than just rolling over super funds or converting their accumulation to pension) then having the Super funds being able to provide advice more easily is not going to impact my business one bit.
Super funds aren’t going to work with clients accountants or lawyers or mortgage brokers, so pose no real threat.
Always look on the bright side of life!
I agree – woohoo thanks Jonesy, never lost a client to a super fund who would’ve been an ideal fit.
Spot on – have to question how strong the client relationships currently are for advisers to be petrified of these improvements. Most industry fund members aren’t FP clients.
Best of luck with being able to charge fees without the economies of scale to offer “fee-free-advice”…. especially for new clients. Over time, advisers will become increasingly aligned to institutions, almost like tied-agents. Apparently, customers want this, according to Mr. Jones.
I feel that a lot of the negative comments are because of the continuing perception of ‘unlevel playing field’ between service providers which arguably has now been turbo-charged.
The SOA requirement is only being scrapped to allow super funds to dish out advice. Financial Advisers will be required to produce an ‘Advice Record’, which will end up being the same thing, and you will need to get your clients to sign it to adhere to the code and keep your dealer group/PI insurer happy. A streamlined consent form is the only benefit for advisers. But watch Treasury and ASIC stuff that up in a way that causes us to spend more time on the process than currently. You know they will.
So, Financial planner can’t be paid via the Admin fee as was once done – -oh no, conflicts of interest and consumer detriment. But wait, now that Financial Planners have been removed from the competition, Super (Industry Super) can now be competitive and do exactly what others can’t?
As a new adviser, the only thing in the QAR that helps me is the changes to FDSs. I’m very sceptical of the value of scrapping SOAs because essentially the same work has to be done regardless of the size of the document presented to the client. Feels like the government is flicking some breadcrumbs to me and giving a feast to the larger vested interests who couldn’t care less about financial advice being a profession.
Interesting that recommendation 13.2 is the only one not addressed in the government’s published response.
The Super Funds will be the next banks for complaints. Watch out AFCA.
I doubt that – very different remuneration model. Banks had their chance and blew it unfortunately as they were perfectly placed to give holistic advice had they chosen that path.
The union controlled industry funds have received their reward from a Labor government – expanded super fund advice, and the ability to provide it for free to members.
Well good advice not passed and this is for tranche 2, tranche 1 has some sensible FP reforms
Wont be free – fee for no service anyone?
that was always the plan – to make it all about the commercial side – up our costs – make us uncompetitive and constrained by regulation – and the other team a free for all – pretty much exactly what Bernie Ripoll said they were going to do word for word
It’s not free. All super fund members are paying for it. But most members are paying fees for no service.
So how will fee for NO service be controlled effectively. Going backwards for the future to satisfy the big end of town again? Remove the big end of town from touting themselves as advisers. Hay, here’s an idea, have the big end of town call their advice documents a sales document that the consumer is told may not be in their best interest. That they should seek professional advice from someone else before going ahead. Kind of like you can buy this medication from a pharmacy, but the side effects are…. etc. This won’t work. What am I saying as the fools in charge need to pander to the instos….right?
Abolishment of SOAs. Just in time for the super funds to give “advice”. Nice timing. :-
they already give advice
Congratulations on finding a negative way to look at it.
Can’t meet the Code of Ethics without an SOA or similar. The FAAA idiots who claim to represent us were conned so easily on that one. Dropping SOA’s will only benefit the super product providers, as they don’t have to adhere to the code. It was a clever ploy by Levy. Pity we are so poorly represented
So super funds can give financial advice, but he’ll wait until the end of the year to decide if they have to give ‘good advice’ or not?
with a legislative best interests obligation (sans safe harbour), as for all advisers.
“remove restrictions on collective charging of members for advice”
I don’t think that was one of the recommendations.
yes it was
Recommendation 6:
Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.
Exactly as I have been predicting all along. The monopoly of the Union Super Funds will now be strengthened due to the Union Super Fund’s “consent free” IntraFund “Advice” fee for no service racket which will now have a greater advantage over retail advisers still chained to the Annual Fee Renewal consent FORM. Well done guys. You have been completely conned. The inconsistency with fee consent now is simply breathtaking.
out of interest, how hard will it be to see you clients and get them to fill out a form once a year?
Just how badly are we (advisers) being represented by our associations who we pay to represent our interests, as opposed to the super funds? Is it time to dump the amateurs supposedly representing us?