Michelle Levy has confirmed she believes changes must be made to the regulatory framework in the Quality of Advice Review (QAR) proposal paper released on Monday.
In the paper, Ms Levy put forward a number of proposals, including that the financial services regime should regulate the provision of “personal advice” which should be “somewhat broader” to ensure clarity. The paper also suggests that “general advice” should be removed altogether.
Ms Levy also proposed that superannuation trustees should be able to provide personal advice to their members and have discretion to decide how to charge members for that advice.
The full 12 proposals include:
1. The financial services regime should regulate the provision of ‘personal advice’. The definition of ‘personal advice’ should be somewhat broader so it is clear that it applies whenever a recommendation or opinion is provided to a client about a financial product (or class of financial product) and, at the time the advice is provided, the provider has or holds information about the client’s objectives, needs or any aspect of their financial situation.
2. The regime should no longer regulate ‘general advice’ as a financial service and the definition should be removed together with the obligation to give a general advice warning.
3. The financial services regime should require a person who provides personal advice to provide ‘good advice’. ‘Good advice’ is advice that would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided.
4. A provider of personal advice should be a ‘relevant provider’ where the provider is an individual and the client pays a fee for the advice; the provider (or the provider’s authorising licensee) receives a commission in connection with the advice; there is an ongoing advice relationship between the adviser and the client; or the client has a reasonable expectation that such a relationship exists.
5. Superannuation fund trustees should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement. In doing so, trustees would be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the provision of the advice.
6. Superannuation fund trustees should have discretion to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.
7. Superannuation trustees should be able to pay a fee from a member’s superannuation account to an adviser for personal advice provided to the member about the member’s interest in the fund on the direction of the member.
8. Providers of personal advice should obtain annual written consent from their client to deduct ongoing advice fees from a financial product.
9. Providers of personal advice should be able to determine what form of advice would best suit their clients. Providers should be required to maintain complete records of the advice they provide and to provide a written record of advice to a client on request. This would replace the current requirement for advisers to provide a statement of advice or record of advice.
10. Providers of personal advice should either continue to give their clients a copy of the financial services guide or make information available to their clients on their website about their remuneration and other benefits they receive, their internal dispute resolution procedures and AFCA.
11. The reporting requirements under the design and distribution obligations regime should be simplified by requiring relevant providers to only report to the product issuer where they have received a complaint in relation to a financial product.
12. There should be an adequate transition period for implementing these changes. Consideration should also be given to allowing providers to ‘opt in’ early.
“The purpose of the review is to consider whether changes should be made to the regulatory framework applying to financial advice to improve the accessibility and affordability of financial advice,” Ms Levy wrote in the proposal paper.
“My answer to that question is ‘yes’. Moreover, I think the changes need to be substantial if financial advice is going to be widely accessible and truly affordable.
“It is clear the current regulatory framework is a significant impediment to consumers accessing financial advice. It is also preventing advisers and institutions providing advice and assistance to their customers. The proposals in this paper are intended to make it easier for consumers to access financial advice that meets their needs from a range of different providers, and for advisers and financial institutions to have more helpful conversations with their customers.”
Ms Levy addressed concerns that some of the proposals would “retract hard-fought changes” intended to protect consumers. However she argued that the proposals she has put forward are designed to make it easier for consumers to access personal advice and for financial advisers to provide advice.
While Treasury opened consultation on the proposals, it reiterated that more discussion is still to come.
“The review is not over and this paper sets out proposals for the purposes of further discussion,” the paper reads.
“They are not final recommendations, nor are they complete.”
Feedback is now open and closes on 23 September 2022.
Ms Levy recently discussed progress on the QAR on the ifa Show podcast. Listen to the full episode here.
The more they fiddle the more Rome burns, they are again bringing in uncertainty, anxiety and stress to advisers
So this will make advice more affordable. Don’t think I would change my fee structure. It would just mean that we might have a viable business model going forward.
This circus will just continue unless we make the easy and necessary decision to ban any “Financial Adviser” from being associated (meaning able to derive a benefit) from a product provider.
All this handwringing over “BID” and now “good advice” is just moving the deck chairs on the Titanic.
No vertical integration – no advice from Industry Super Funds about product – end of story.
A Profession does not consist of members who can be seen to have any conflicts of interest – after all the term “adviser” does suggest that that is what you should be receiving when you go to see an “Advisor”.
Once this step is taken – the rest will be much easier to regulate.
I am confident that any Super fund that advertises their fees are only $1.50 a week, and uses selective time period in advertising returns is of course going to do the right thing by Australians. If Australians can’t recognise the conflict when they enter a building with NAB written all over it , and sit in front of someone with NAB on their shirt, and they’re being told to cancel their CBA insurance, how is it going to be possible we think Super funds will do a better job.
I believe certain people in Treasury seem to believe so – no evidence as there is a sector of Super product providers who seem to be missed with most investigations by ASIC. In a First World Democracy – not good. Read the RC submissions from Treasury – amazing demonstration of what appears to me to be complete bias hatred for Financial Planners and profit motives entities.
Regulatory Capture Corruption is crazy in Canberra bureaucracies from ASIC, Treasury, AFCA, etc will all never do anything against best buddies Industry Super.
They want and promote anything and everything Industry Super.
And Industry Super will continue to be allowed to whatever they want and more so after this QAR rort.
Financial advice from inhouse product providers worked so well the last time. Let’s try it again but this time with no SoAs and education requirements!
And to think they spent all that money on a Royal Commission demonising vertical integration.
I can’t see our PI insurer just letting the client and I ‘figure it out’ when it comes to documenting the advice we give. Definitely want a shorter Advice Document/Letter but clients still ask lots of questions about fees especially when we are changing products.
To me loosening the knott like this will have bad outcomes in vertically integrated advice businesses.
I can, Accounting and Law has a similar framework and their PI premiums, often pooled in professional bodies or institutes, is about 10% of Advisers.
You sure the relief is for you as a Financial Planner – or is the relief for Product Providers providing Personal Advice that does not need to comply with BID?
Both as the QAR proposals stand. I hope they’re not piecemealed in that manner
I hope that everyone that has posted here will actually do a submissions before the 23rd of September as posting here isn’t going to make a scrap of difference and there are some really good points have been raised.
I hope there is professional consensus on some so the submissions don’t cause a chasm to piecemeal the recommendations or fractionalize Advice further. Finance brokers demonstrated a consolidated message is likely to be heard more clearly.
Finance Brokers had an association that acted for Brokers and Australians. We have the FPA that wants to act for everyone (the whole industry) including what’s in the best interest of super funds. Hence until we have a body that acts for Australians and Adviser we all need to individually write as Financial Planners acting in the best interest of Australians.
So I would expect that after the acknowledgement from Govt., Treasury, ASIC and AFCA of the bad regulation and appalling compliance regime from FOFA onwards, there will be suitable and appropriate compensation paid to financial advisers in line with the financial destruction, reputational damage and mental harm caused over the last 10 plus years.
We are going backwards again. Why in the hell super trustees allowed to advise again? I don’t think they realise over 90% of breaches from the Banking Royal Commission were literally from the banks. This industry is such a joke. It almost means, we have warned you (banks), fined you and we think that’s enough, we give you another chance. On the other hand, advisers continue to be jailed and banned. Did the big AFSLs ever got banned from advising, lose licensee or anyone jailed? No! Where’s equality?
A lot to digest! 80% good, but some really scary stuff in there too. I had higher hopes of Michelle Levy. Creating a new category of individual personal financial advice provider who can give the exact same advice we can but doesn’t have to meet education standards or code of ethics is a doozy – as long as client payment is indirect instead of direct. At least that’s how I read it on first pass – hopefully I’m wrong??
Eg. pay for accounting services & get financial advice from a non-financial adviser on the side? Eg. Pay a fee to be a private banking client & get financial advice from a non-financial adviser on the side?
And no code of ethics for these non-financial advisers means no best interest duty for them (when it’s removed from corps act), so surely vertical integration is going to return bigger than before – as long as it’s ‘good advice’ which is a low bar to overcome: ‘if my client follows my advice, are they likely to benefit?’
I’ll be following with interest.
Unbelievable incompetence. Industry super funds will dominate and competition and innovation will be lost. Good advice we end up like the legal profession where there is very little transparency or oversight on providers as there is now under the AFSL obligations. Beauracrats , unions and those who have never sought personal advice making decsions for those who appreciate it has got me flabbergasted. Of course AFCA are mentioned as core to the solution but how if an employee of an industry fund simply gives good advice about the employers products they wrok for without any need to give an advice document , as does a lawyer is archiac
Industry funds providing advice for their products. Wasn’t the RC trying to abolish vertical integration?
RC was trying to eliminate all competition to Industry Super – and appears to be doing well – now they just want to charge everyone a fee to provide advice to retain their product at retirement – whilst Qualified Financial Planners are busy with FDS etc – but I could be wrong.
At the end of the day it’s only those in their 20s and 30s with minimal amounts in super who will use digital advice. If you are relying on this cohort you don’t really have a viable business model. Play on.
That’s like saying only those in their 20s and 30s with minimal assets will use the public trustee instead of paying for the professional advice of an estate-planning solicitor. In my experience, that’s not the case.
I think the recommendations are really positive and if the super fund recommendations stand, hopefully our Profession can come together to get all of the initiatives legislated. Really sensible and positive instead of another layer of red tape.
So, the conspiracy theorists who claimed that the purpose of the RC was to destroy advice as it stood and then replace it with vertically-integrated, centralized, institutional, robo-advice, were 101% correct?
Gee no more SoAs. Advisers have always said this is the greatest client cost. Advisers will now be able to reduce fees by $2000 per year – hell will freeze over first.
I think I will reduce my cost and the average cost will reduce not continue to increase. Also my capacity to advice more people, quicker, will certainly increase
This will make FASEA’s code of ethics completely obsolete. Although, i think everyone had already forgotten that anyway.
The trouble will be licensees will still be mandating their own compliance to protect themselves. They will still want advisers to complete advice documents, not for anyone’s benefit but to protect the licensee. The licensee also needs to justify their existence, because they define most of their “service” around providing compliance templates and collecting revenue. In reality there is no place for licensees, especially under the model being proposed here.
At the moment there are a substantial amount of super funds that do not allow an advice fee to be paid to an adviser regarding a members interest in fund. This is for a range of reasons but it is frustrating as to why different Trustees have different opinions on the same issue.
If the SIS Act and the Sole Purpose Test is made clear for Trustees to navigate – does this now mean that a Trustee must distribute the fee for advice being provided by an adviser regarding the members interest in the fund?
If not, why not? Should it matter if the advice is being provided by the Fund Trustee or an external adviser?
Why should my client be forced to using a Trustee service in order to use their super to pay for some of their advice? This is non-sensical and prohibitive.
Failure to address this would extenuate what is already a very unlevel playing field. Why should it matter who provides the advice if it is good advice?
Surely every super fund trustee out there who’s product is being recommended for a client would like to think that us of their product is “good advice”.
The whole thing is extremely concerning. Why not just take a step back, reduce the SoA’s and retain the RoA’s, have the Consent Form signed by the client, retain a 10+ rule for experienced planners without a degree, retain the GA space (as it is a good space to retain), and ensure that the legislation is simplified. This whole thing really is not rocket science. I was reading this thinking that all the hard work that has been done to build confidence will ruin it in 10 years again (if not less). This is dangerous.
You need the 10 year carve out or being considerate of those who do? Too many vested interests all over the place!
SOA’s and ROA’s are too long. As a burgeoning profession we should be able to decide how we present the advice record (digitally recorded works too). This process is guided by the Financial Advisers and Planners COde of Ethics.
A 12 month agreement can be signed and re-entered into annually which will address prior informed consent and an understanding of the advice presented. Why duplicate with a consent form?
The “legislation” is simplified if it become Principles based…and we already have the Code of Ethics in place to guide this.
Love the carve out for digital advice…seems like they can’t see past the fact it is only designed to have them invest in their own managed funds/super.
Let’s use their example (Cameo 4) to highlight the big issue:
123 Investment Managers offers exchange traded funds (ETFs) and managed investment funds. It has a free digital advice service. This allows potential clients to enter a small bit of personal information, and fill out a short risk assessment to find out which of their products is best suited to them.
Stefan uses the digital advice service after getting a windfall gain of $5,000. Stefan also has a high interest credit card, which currently has $2,000 in outstanding debt.
The “advice” is for Stefan to pay off any outstanding debt, and then invest in their high growth managed fund.
Issues:
1. What are the chances they will really say pay off your debt…
2. What if the investment fund is crap with fees twice as high as the industry average and no history of over performance?
3. Can a human adviser do the same thing? ie ask 5-6 questions and then give them advice on where to invest their money?
Let me guess, Government will say yes to the concessions for Super funds, but no to most of the other things. Hope I am wrong!!
me thinks you very very smart man…oh wait we’ve done this dance plenty of times.
The mess just got a whole lot bigger and messier.
I wonder what is meant by a written record of advice to replace SoA’s and RoA’s
Any Record of the Advice in the format you deem necessary….
Sounds pretty self explanatory. You don’t need to provide an ROA or SOA, but you need to have good records of conversations. If the client asks for a written record of the advice you provided, you are obligated to give them one.
It is what is currently in play – at ASIC’s and AFCA’s discretion on any given day (with zero guidance). There is no mention in any of the above proposal of what ASIC’s new powers will be, and if any watering down occurs or not.
“The financial services regime should regulate the provision of ‘personal advice’.”
Hopefully, she means self-regulated…
Maybe we will need to ask our PI Insurers what they think, because I doubt ML would have considered it…
“receives commission” – dear God – is this the level of analysis that has occurred?
Life Insurance companies still pay commission…
OMG do financial planners still receive “commissions” under dot point 4……. this report will be a disaster if we are still referring to advisers receiving “commissions” for advice……… regulators still don’t understand financial advice…..
Some do, but you are focussing on the wrong thing. This is meant to mean people that take any form of remuneration from clients…
Lots of concessions for Super funds…literally it’s a free ride…with some sprinkles of concessions for Advisers that are likely to be knocked back…..I’d prefer lots of exemptions for licensed advisers and some concessions for super funds.
Let’s see how long these take to be implemented if they are ever even implemented.
“Ms Levy also proposed that superannuation trustees should be able to provide personal advice to their members and have discretion to decide how to charge members for that advice” – Wow!, just wow! no conflicts of interest either…
Trustees have a fiduciary duty to act in the best interests of the members of the fund. Advisers going forward will have a duty to provide “Good Advice”….
Members not member – Super Fund will simply recommend the in house product – and then charge all members for the advice to that member – helps retain FUM and that I guess is in the best interest of the members – Could be wrong. Anyway, conflicted product advice and charging members for advice they never receive turns out to be all OK – and obviously it does not matter if the product is appropriate it appears.
All good, [u]but[/u] (8) ‘annual written consent’ needs to be modified to 3 years. Annual opt-in is incredibly labour intensive with little benefit to the consumer.
not to mention the jail time and the $100K fine per occurrence if you get it wrong.
Rick, why do you think it is not necessary to ge your clients consent every year to keep taking fees from them? Putting aside the mechanics around how it is done and the potential penalties, surely you meet with your clients at least once a year…
Explain to me point 6 then?
He answered this: “Annual opt-in is incredibly labour intensive”
You’ve obviously never done it? It’s incredibly painful/ more paperwork for no benefit to the client.
The clients you’re meeting with every year already know they’re paying you a fee. What’s the value in getting them to sign an additional 2 or more documents (if they have more than one product) that you then need to process often to have them declined by the product providers?
If they’ve signed an SOA why the extra paperwork?
My gym doesn’t seek my consent to keep taking fees. In fact I had to take one to court to force them to stop after 7 years of demands. My lawyer doesn’t get my annual consent to have him on retainer either.
It’s not hard to get consent when you meet with your clients each year. Having the luxury of taking fees, in advance of providing the service and from a facility like superannuation which is less visible than your bank account, requires additional disclosure to ensure clients are well aware of what is being charged and we don’t stumble into another fee for no service debacle that we’re still tainted with as an industry. If you have an issue with it why not charge your clients in arrears like most accountants do?
That’s not coming from a product or retirement savings, and is paid for in after tax dollars. Have your clients pay an annual retainer to you outside super that is a fixed term contract.
Still needs to be resigned every 12 months, I don’t understand your similie at all. This doesn’t exist in any other country.
I have my doubts much of this will get up. I read the report in full and there is little change for licensed advisers providing personal advice across a broad range of client interests. She suggests that advice should be written and may take the form of a SoA and is still under BID. Basically it’s the super funds and banks who will win here. Oh they also get the discretion to determine who is an authorised person to give limited personal advice.
he probably wants to meet with them on a Monday not a Tuesday in order to get those fee forms resigned. Meeting on a Monday if the anniversary date was Tuesday would mean ASIC would send Rick to Jail.
A 12-month agreement that expires at the end of the 12 months unless a new agreement is entered into should take care of this issue?