Earlier this week, Minister for Financial Services Stephen Jones released the first tranche of legislation concerning the Quality of Advice Review (QAR) – a package aimed at reducing red tape.
But, while the initial draft legislation embraced about half of the QAR recommendations, it noticeably omitted the pivotal recommendation nine – the one advisers eagerly championed – calling for the substitution of lengthy and legalistic statements of advice (SOAs) with a financial advice record for consumers that is more fit for purpose.
Speaking to ifa, CEO of the Financial Advice Association Australia (FAAA), Sarah Abood, revealed confidential discussions about the revamped SOAs are currently underway behind closed doors.
Ms Abood pointed out that the challenge with SOAs lies in their interconnected influence on other facets of advice regulation, including the Code of Ethics and the best interest provisions.
“The other issue with SOAs is that what’s in the Corps Act is important and sets the tone, and sets the scene, but the way those laws are implemented is also very important and it’s been observed by many that what’s in the Corps Act currently is not too terrible. When you read it, it seems fair enough and yet somehow, we’ve ended up with 80, sometimes 100-plus page SOAs,” Ms Abood explained.
“So, it’s also important to consider how the regulator will interpret what’s in the Corporations Act and how licensees will implement all of those matters. We’ve got to consider all of those because they’ve got to be resolved if we’re to get genuine streamlining and genuine savings in what’s going on into producing these documents”.
Ms Abood noted from her interactions with the minister that she has observed a “very genuine” intent to address and resolve this issue.
“There is a real recognition that these documents have become, you know they’re like software terms and conditions. They are these voluminous things that few people read and yet the providers are relying on to protect them, and that doesn’t help the consumer. So, it is genuine that we need to change this, and the intent is really there”.
Expressing optimism, the FAAA CEO anticipates the release of draft legislation addressing SOAs before Christmas. Additionally, she revealed that the draft is likely to incorporate changes allowing superannuation funds to potentially offer simple personal advice through non-relevant providers.
Acknowledging the disappointment voiced by advisers who feel that this week’s announcement fell short of expectations, Ms Abood emphasised that, although she shares in the disappointment, it’s crucial to view this as a “delay and not a no.”
“These changes will still be made, we just found that we need longer to get these changes right is very much what Treasury is saying. And the intent is that it is better to get it right than put draft legislation forward that’s not going to solve the problem,” Ms Abood said.
Earlier this week at a media briefing addressing the first tranche of legislation, Mr Jones said that while he deliberated over whether to delay the first tranche to incorporate SOAs, ultimately, he opted not to impede the process.
“It’s just about being entirely pragmatic. What’s ready to go, let’s get it out, don’t hold it up,” he said.
Providing additional context regarding SOAs, the minister said that the consultations are “pretty much done”.
“We’re just working through some of the technical details of it”.
While Minister Jones clarified that the exclusion of this and a few other recommendations from the first tranche of legislation would not delay their push through Parliament, he hinted that SOAs could now slot into stream two of the government’s legislative response to QAR.
“If anything, it might be the opportunity to accelerate some of the other stuff as well. For that stuff, it won’t delay. We’re always of the view that we’d get the draft legislation for stream one out this year and come back early next year with the draft legislation for stream two,” he said.
The government is consulting on the first tranche of legislation until 6 December.
