The Quality of Advice Review (QAR) is exploring ways to ensure that Australians have access to high-quality, affordable and accessible financial advice.  This is surely a good thing, but when reading what recently came out, I was slightly baffled.

Since 2003, the compliance and legislative requirements of the financial advice sector has grown more than any other sector in history.  Advisors have spent years embedding the rules and regulations into their operating environments, working out how to run their practices more efficiently and are now enjoying significant demand for their services.

Understandably there are concerns about the impact of the proposals in practice in terms of access to affordable advice. I also appreciate that the compliance and paperwork is quite exhaustive. But to almost remove this altogether concerns me.

The recent draft proposals from the QAR provide some insight as to what the final report may look like and you still have a couple of days left to have your say.  Below is a summary of the 12 points for your consideration.

What should be regulated?

• 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.
• 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.

How should personal advice be regulated?

• 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.
• 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.

Intra-fund advice and paying for advice through superannuation

• 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.
• Superannuation fund trustees should have discretion to decide how to charge for personal advice they provide to members and the restrictions on collective charging of fees should be removed.
• 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.

Disclosure documents

• Providers of personal advice should obtain annual written consent from their client to deduct ongoing advice fees from a financial product.
• 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.
• 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.

Design and distribution obligations

• 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.

Transition period and enforcement

• There should be an adequate transition period for implementing these changes. Consideration should also be given to allowing providers to ‘opt in’ early.

It will be an interesting time in the coming few months and into the new year, as a result of submissions and feedback from the industry as a whole. However, is it time to panic? I do not feel it is. If anything, we need to band together as an industry and improve the services we have in front of us and remain focussed on the client. I know we are doing that, so let’s show them what we are made of.

Geoff Byrnes

Geoff ensures that our financial advisers follow their compliance duties and legislation so that our clients’ best interests are always at the heart of what we do.  Read his full bio here.