In parliament on Monday, Liberal MP Bert van Manen introduced a private member’s bill – the Corporations Amendment (Streamlining Advice Process) Bill 2024 – saying that “this bill is designed to improve and streamline the financial advice process”.
Speaking in parliament, van Manen said: “As we have seen over the past 16 years, a massive increase in red tape and regulation in this sector resulting in advice being too expensive, too hard to access, and strangled by red tape.”
“We have seen advisers close their books because they are flat out managing their existing client base because of the regulatory impost and they are no longer able to take on new clients.”
The purpose of this bill, van Manen said, was to streamline the engagement process between the financial adviser and their client, and it does this in two ways.
“Firstly, by creating the requirement to provide a clear and concise letter of engagement, which will be provided to a client prior to receiving any financial advice. This letter confirms a clear and transparent agreement between the adviser and the client that clearly outlines the scope of the advice to be provided,” he said.
“Secondly, this bill removes the requirement for the provision of a statement of advice. The reason this is important is that these are currently 100-page documents that nobody reads.
“The important bit in all of this is what is the advice that is being provided and how does that relate to the scope of the advice being sought and that is why in this bill we replace the statement of advice with what is called a record of advice.”
The MP explained that the term record of advice was already “well understood” in the profession, and was an existing provision within the Corporations Act.
“These changes are meant to ensure that the client will be provided with the advice that they seek and in a way that is clear and concise, and easy to understand. More importantly, in simplifying this process it is expected to reduce the cost and the time taken to produce statements of advice in that they are being replaced,” van Manen said.
He explained that he was not of the view that statements of advice (SOAs) should be removed altogether, because “I think the agreement between the adviser and the client should be in written form”.
“I don’t believe that having a verbal understanding or agreement in this space, given the complexity of some of the work that is done for the clients, is a good outcome for either the client or the adviser.”
“These changes also ensure that the advice provided to the client is directly relevant to the scope of advice sought.”
The bill was seconded by shadow financial services minister Luke Howarth, who commended van Manen in parliament and reiterated what he perceives are Labor’s failures on the advice front.
“Labor’s inaction, the Albanese government’s inaction, on financial advice reforms is leaving Australians under advised and underinsured. Now, it’s been 689 days since Michelle Levy handed down to the Albanese government her Quality of Advice Review final report,” Howarth said.
“The government has failed advisers by leaving implementation of the review’s most important red tape reducing recommendations to the very last minute, including the recommendation to remove statements of advice.
“Action on reforming the burdensome statement of advice process is long overdue and these reforms will significantly reduce the time and cost of providing advice.”
According to the explanatory memorandum, the bill was informed by and would build upon Levy’s 2022 Quality of Advice Review, specifically ‘Recommendation 9 – Statement of Advice’ and the ‘Good Advice Duty’.
The memorandum explained that the bill, if legislated, would enable the creation of a “clear and concise letter of engagement, prior to any financial advice being provided” as well as a streamlined record of advice.
“This confirms that a clear and transparent agreement is in place, before any advice is provided, while standardising the administrative requirements for all types of advice provided,” the explanatory memorandum said.
“The bill also reduces the administrative burden on providing entities, through the streamlined process of engagement created, for all forms of advice sought.”
The letter of engagement would, according to the EM, outline the scope of advice to “ensure there is a clear understanding and agreement between the providing entity and the client on the scope of advice to be provided”.
It added that SOAs were “burdensome, repetitive and rarely read by clients, with their complexity leading to significant additional administrative work for financial advisers, leading to increased costs of advice for clients”.
The bill would see SOAs replaced with a record of advice, which it said would make advice documents easier for clients to digest and also reduce the administrative burden on businesses and costs to clients.
“The bill will introduce the requirement that the ROA outline why the advice is ‘directly relevant’ to the agreed scope of the advice sought and the client’s personal circumstances,” the EM said.
“As with an SOA, it is envisioned that an ROA will be provided prior to providing any advice.”
The debate is adjourned and the bill will be read a second time at the next sitting.
Good luck with interpreting what “a clear and concise letter of engagement” means. Just another piece of red tape for the lawyers and licensees to complicate.
We use one now. If this is beyond you, not sure how your clients would go reading your SOAs.
Misleading to say that SOAs are “rarely read”. Advisers must be satisfied that the client understands the advice. The vast majority of us are doing this in a variety of ways including summary sheets, PPT slides, etc., Admittedly, the client may not ever again bother with a SOA.
In my 30 year career, not one single client asked for a 30 page fact finder, and a 50-100 page Statement of Advice, to know the process of how to build toward a comfortable retirement. All they wanted was a succinct strategy for their mortgage, super fund, personal share portfolio or rental properties. With a summary of their costs and what was in it for the advisor (commissions, rebates, kick-backs or volume bonuses etc) that could be done in a short strategy doc. Sadly political fools, who had never been face to face to average Australians forced complex on the financial advisory industry. Now they think unnecessary compliance isn’t such a good idea, didn’t we tell them 10-15 years ago?
Out of the thousands of SOA’s I’ve undertaken so far, I might have done one that has 100-pages.
Scared paraplanner?
If the Industry Super funds don’t agree it hasn’t got a hope in hell of getting through. They will see it as making it easier for advisers to move money out of their funds. So it’s got no chance of happening.
Exactly why it needs to happen and wasn’t pontificate delayed and bastardised like the qoar response from alp
It does seem it is all about FUM? Big money?
Why is it suddenly acceptable that Product Providers be allowed to provide advice which is not subject to BID?
Trustees of Product Providers are required to act in the best interest of their members, which is basically a good argument to maximise FUM – this is a very different test to BID (Individual). Why is it now acceptable that Product Manufactures charge members a fee for the provision of advice, but it is not fee for no service if no advice is provided? I know the technical difference, but seriously, is it not “Conflicted Advice”? If it is, why is “Conflicted Advice” now acceptable from this “New Class of Adviser”? Seems very deliberate?
That’s unrelated to the article
I would have thought this legislative change proposals and related requirements should be made by practicing financial advisers who actually use these documents.
Too many “Experts” around for that to happen?
He was an adviser for 11 years.
They rried in their formal submissions to both tranche 1 and qoar. They weren’t published or completely ignored, when press on the secrecy Jones responded he didn’t have to engage with the advice community or act on feedback. Facts.
Now we will see who votes for and who votes against.
And for the love of the profession IFA ask WHY they voted that way I stead of promoting some ad or specific newbie adviser.
Genius, hope its passed. Good on Liberal. Actions not words and simplifies everything. Got my vote
Yeh Genius, Frydenberg & LNP gave Advisers 9 years of action with the most obscene increases in Red Tape costs and Adviser persecution ever. LIF, FARSEA, AFC to double up on FDS and also force it to be approved via admin platforms.
It’s not a look back it’s an actual action to move forward in reducing red tape
Once again another politician getting involved in our industry for no good reason. How about stay out of our industry and let us get to work, instead of trying to change the goal posts again!
Look at the #s current state is not working
He is an ex-adviser who has been advocating for favourable change to assist the profession for some time. At least he is trying.
Hilarious, one solo MP puts forward some recommendations. So ONE single MP is all it takes to write some legislation and put forward a private members bill.
Good on the AIOFP for taking the initiative. Just curious has the FAAA been asleep at the wheel for the last decade? I’m at loss why the FAAA never put forward there own recommendations concerning the QAR and their own best practice Advice document. Then went to a MP like this individual. Why not take a leaf out of other professional associations and just write what’s best.
Is anyone at the FAAA capable of writing a best practice documents?
This is smart as it separates SOA bloated rubbish that no one is wanting or debating should be majorly reduced.
Away from Qualified Advisers / BackPackers sales agents that is what Jonesy has tied together to try to appease Real Advisers getting screwed with a small gift of reduced SoAs.
When will Labor seriously seek to implement changes that increase affordability of advice? Real advice, not some narrow industry super robo advice.
a lot of money & donations comes in via Industry Super funds. It’s big biscuits. Those big Super funds control the flow of FUM in Australia and we can’t have politicians doing what’s right for Australians can we.
That’d explain why Vanguard is chasing market share in Aus super now…
An ROA can also be 100 pages…aspects of the Corporations act need to be changed to have a real impact.
This is a change to the corps app
Without the promised changes to the Best Interests Duty, the RoA will still need to be longer than ideal to demonstrate the 7 safe harbour steps, which I know are not law, but most licensees impose to rely upon meeting BID.
Common sense prevails!
Only if it passes parliament and given the influence from the vested interests, it’s an uphill battle.
About time. On the list of time consuming tasks adviser undertake, SOAs are #1.
oh so this was an option this whole time?
Where was our Industry Bodies dealing with these issues and forcing the Government’s hands? Will PI Insurers allow this? Even if it is legislated, will the PI Insurers be comfortable with this? Who knows.
Seems like the licensee/adviser, or AFCA or the CSLR are the mechanisms for compensating clients these days. Is there any info on how much PI insurers have paid each year for personal advice complaints?
Sucking on the teat of Industry Funds and Jones
They have been busy, they are the reason this has come about. Der!
I believe aiofp is why. Not the bias faaa
PI insurers will not be comfortable with this.
Mandatory pi should be eliminated. Bloody junk Insurance and expensive at that csolr is there afca there asic banning everyone SCRAP PI. It’s gouging from insurers my friends accounting practise pi is about $500 my mortgage broker friends is $500. Ours $10-20,000