‘The changes need to be substantial’: Treasury releases Quality of Advice Review proposal paper

Allens partner and superannuation law specialist Michelle Levy – who has been leading the Quality Advice Review – has confirmed she believes changes must be made to the regulatory framework.

In the Quality of Advice Review (QAR) proposal paper released on Monday (29 August), 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 that it is clear 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.

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