The government has finally released its response to the Quality of Advice Review Final Report.
The report, authored by Michelle Levy, was delivered to the Minister on 16 December 2022 and contained recommendations aimed at ensuring Australians have access to high quality, accessible and affordable advice.
In an announcement made on 13 June 2023, the Minister for Financial Services, Stephen Jones stated 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.
Of the 22 recommendations, the Government will adopt 14 recommendations in full or in principle and will progress them through three streams of work.
The first of the streams is about removing red tape that adds to the cost of advice without benefiting consumers. These ‘quick wins’ include reform to the ongoing fee renewal and consent requirements, flexibility in how Financial Service Guide requirements can be met, removal of the safe harbour steps from the Best Interests Duty and replacing statements of advice with an advice record that is more fit for purpose with consultation to determine the final design of the replacement. This stream also includes the introduction of standardised consumer consent requirements to classify a consumer as a wholesale or sophisticated client. The government has stated that it intends to move quickly on these reforms to fix the problems facing financial advisers in providing quality advice.
The second stream is about the expanded role of super funds in providing retirement income advice and allowing for collective fee charging. The government intends to adopt the review’s recommendation for superannuation funds to expand their provision of advice and provide legal certainty for funds on how to collectively charge for it. The minister has identified access to retirement income advice as ‘the most significant burning deck in the financial advice space’ and wants superannuation funds to play an expanded and more effective role that serves the needs of their members, particularly in light of the Retirement Income Covenant.
Interestingly, this stream includes recommendations one to four from the Levy report that essentially do the legal ‘heavy lifting’ required to deliver more, good quality advice to more consumers ie broadening the definition of personal advice, removing the general advice warning, allowing non-relevant providers to provide personal advice and introducing the good advice duty. The government will work with industry to consider ‘adopting, and tailoring as needed’ these recommendations.
Stream 3 will examine the role for other institutions – banks and insurers – in providing more information and advice. It will involve exploring new channels for advice including expanding the definition of personal advice and introducing the good advice duty. This step will involve consultation with industry and consumer stakeholders on how the balance of the proposals might operate under different advice models, including digital, and across sectors.
This consultation will also finalise implementation details for the design of the replacement for statements of advice and the Financial Adviser Code of Ethics.
While the Minister has stated that in terms of priority, he believes it is more urgent to fix the problems for financial advisers (stream one) and help the five million Australians, at or approaching retirement, get access to more retirement income advice (stream two), he is not compelled that the same urgency exists in enabling advice to be provided by other institutions. So as Treasury is working on implementing the recommendation for superannuation funds to provide more advice, it will ‘explore’ with industry what would be required to tailor the model for other institutions. And whether this will make a positive difference for consumers.
SIAA has welcomed the government’s response and is keen to assist government and Treasury implement the quick wins as soon as possible and certainly by the end of 2023. SIAA’s members support urgent reform of the fee disclosure requirements and will be pleased to see the removal of fee disclosure statements and the streamlining of ongoing fee renewal and consent requirements into a single form as soon as possible.
We will continue to stress however our position that the recommendations work as a package and that ‘cherry picking’ the recommendations will not deliver the outcomes that were intended.
When ‘exploring new channels for advice’ the government and Treasury don’t need to pack a compass or sextant – a copy of Michelle Levy’s report will suffice.
The government will issue its final response on the package later in 2023.