Minister Jones has unveiled the government’s policy stance on the second and third tranches of the QAR.
Not only does the government want to see superannuation funds expand their advisory powers, but in Parliament house on Thursday morning - an event ifa was granted exclusive access to - Minister for Financial Services Stephen Jones said that the government supports the creation of a new class of financial advice providers – to be termed “qualified advisers”.
As recommended by the Quality of Advice Review (QAR) – recommendation 3 – this new class of advisers will not be able to charge a fee or receive a commission relating to the personal advice they provide.
“We must give consumers what they actually need,” the minister said on Thursday.
“These changes will apply across all financial institutions, including superannuation funds, life and general insurers, and banks. It is expected that this new class – to be termed ‘qualified advisers’ – will generally be employees of licensed financial institutions. The licensee will be wholly responsible for the advice provided,” he clarified.
This announcement essentially grants banks and insurers the ability to give customers personal advice and unwinds some of the tough rules imposed by the Hayne royal commission.
But, according to the minister, the government does intend to establish safeguards by ensuring the new class of financial advice providers meets additional standards that were not originally recommended by the QAR.
“Australians must be protected from bad products, bad advice, and bad marketing. And this has been the objective of much of the necessary change over the last decade,” the minister said.
“Financial advice has become subject to greater and greater regulation to prevent the worst. And to shift the advice industry away from being a salesforce towards being a professional. We’re not going to reverse that course,” he assured.
In order to ensure that some of the bigger institutions don’t revert to their old ways, the minister said these new advice providers will, alongside their professional peers, be subject to the same standard under a modernised best interests duty, while limitations are placed on the scope of advice they can offer.
“Qualified advisers will focus on providing simple financial advice,” Mr Jones said.
Moreover, qualified advisers will be prohibited from charging a fee and from receiving a commission, which is also expected to help restrict their advice to simple advice. “And on qualifications, as the name suggests, they will be required to meet a government-mandated education standard.
“The exact level of education will be determined in time, but a minimum standard of a diploma may be the right balance, it will be less onerous than the requirements for professional advisers,” the minister said.
He added that this system will enable institutions to “invest in these individuals, in their training and competency to meet the scale that Australians desperately need”.
Digital advice to play key role
Minister Jones also addressed digital advice on Thursday and said that “scale will also be met by emerging digital advice technologies”.
“The benefit of digital advice is that it enables the client to receive helpful advice at a time and a place that suits the client,” the minister said.
In the superannuation context, he noted that he envisions funds creating digital tools in their advice services.
“I expect other institutions might do the same thing,” he said.
“This could enable a member to assess for example, where they are and where they want to be and then develop a contribution investment drawdown strategy that delivers them the income once they retire.”
Additionally, the government is expected to introduce a comprehensive framework for superannuation advice next year by legislating consistent rules on what advice topics can be paid for via superannuation.
The same list of advice topics will apply to collectively charged advice and advice that is charged direct to the individual member’s superannuation account.
Funds will also be allowed to consider a broader range of a member’s personal and household circumstances such as debt, spouse’s income, or age pension eligibility.
Minister Jones noted that all of these changes will be complemented by replacing statements of advice (SOAs) with an advice record that provides clients with “helpful information in plain English”.
“The record has to be clear and concise and effective and actually help the clients make an informed decision about the advice that they have received, and it’s pretty straightforward,” the minister said.
Alongside a revamp in SOAs, a modernised and flexible best interests duty will apply to all providers of advice and will, at its core, have the existing primary obligation to act in the best interests of the client and to prioritise the interests of the client in the event of a conflict.
The updated standard will provide clearer legislative support for scaled or limited scope advice where this meets the client’s objectives and needs, and for advice where the advice provider has limited, but relevant, information.
As announced in June 2023, the existing best interests duty “safe harbour” steps will be removed, while the requirement to provide appropriate advice will be retained.
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