At long last, Assistant Treasurer Stephen Jones has outlined the Government’s preliminary response to the Quality of Advice review – and revealed which of Michelle Levy’s recommendations are being given priority.
Promising to adopt the “bulk” of the recommendations in the final QAR report, Jones said the resulting reforms will “aim to address the high cost of advice, better protect consumers, bolster ethical standards and ensure Australians can access helpful information that could make a meaningful difference to their quality of life in retirement.” He added that the package of reforms will be introduced in three streams.
The first stream, focusing on removing “onerous red tape”, will remove the safe harbour steps from the best interests duty, consolidate ongoing fee renewal and consent forms and replace the SOA with “an advice record that is more fit-for-purpose.” It will also allow for more flexibility in the provision of financial services guides and introduce written consent requirements for insurance products that will result in a commission payment.
The second stream will amend the restrictions on collective charging to allow super funds to provide a wider variety of advice to their members and provide further clarity on the payment of adviser service fees. Jones said super funds would be able to “consider broader circumstances, such as their member’s Age Pension entitlements and family situation, when they provide advice on retirement matters.”
Curiously, it isn’t until the third part of the Government’s implementation roadmap that Michelle Levy’s most widely-discussed recommendation gets a mention. Jones explained that the “good advice” duty, along with broadening the definition of personal advice, will be subject to further consultation with “industry and consumer stakeholders”.
While this may allay concerns from parts of the industry and certain consumer groups about banks re-entering the advice space – for the time being, anyway – it’s worth remembering that Michelle Levy considered the good advice model and the expansion of personal advice to be her most urgent recommendations. In a recent interview with Iress, she said her most “controversial” proposals should be given priority because everything else in the report was supported by the new framework.
Jones, however, isn’t quite convinced. In a speech to the Association of Superannuation Funds of Australia, he argued that “it is more urgent that we fix the problems for financial advisers … I’m just not compelled that the same urgency exists in these other spaces.”
He continued: “There is also a difference between the obligations that cover [banks and insurers] and superannuation funds. 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. The review has given us some principles to guide the conversation.
“But right now, more is needed to get it to the point that it can make a meaningful difference. Those who understand this space know that there is more work to do, even if you support the direction.”
Ultimately, Jones said the Government would explore implementing these recommendations in the future if “[they] will make a positive difference for consumers. Because if it helps consumers, we want to get it done.”
