Not only does the government want to see superannuation funds expand their advisory powers, but on Thursday morning Minister for Financial Services, Stephen Jones, said in parliament that the government supports the creation of a new class of financial advice provider – to be termed ‘qualified advisers’.
As recommended by the Quality of Advice Review – recommendation 3 – this new class of advisers will not be able to charge a fee or receive a commission relating to the personal advice they provide.
“We must give consumers what they actually need,” the minister said on Thursday.
“These changes will apply across all financial institutions, including superannuation funds, life and general insurers, and banks. It is expected that this new class – to be termed ‘qualified advisers’ – will generally be employees of licensed financial institutions. The licensee will be wholly responsible for the advice provided,” he clarified.
This announcement essentially grants banks and insurers the ability to give customers personal advice, and unwinds some of the tough rules imposed by the Hayne Royal Commission.
But, according to the minister, the government does intend to establish safeguards by ensuring the new class of financial advice providers meets additional standards that were not originally recommended by the QAR.
“Australians must be protected from bad products, bad advice and bad marketing. And this has been the objective of much of the necessary change over the last decade,” the minister said.
“Financial advice has become subject to greater and greater regulation to prevent the worst. And to shift the advice industry away from being a salesforce towards being a professional. We’re not going to reverse that course,” he assured.
In order to ensure that some of the bigger institutions don’t revert back to their old ways, the minister said that these new advice providers will, alongside their professional peers, be subject to the same standard under a modernised best interests duty, while limitations are placed on the scope of advice they can offer.
“We will also clarify that advice can cover only one or two, one or a few topics where this meets the client’s needs and objectives,” Mr Jones said.
Additionally, the government will introduce a comprehensive framework for superannuation advice by legislating consistent rules on what advice topics can be paid for via superannuation. The same list of advice topics will apply to collectively charged advice and advice that is charged directly to the individual member’s superannuation account.
Funds will also be allowed to consider a broader range of a member’s personal and household circumstances such as debt, spouse’s income, or age pension eligibility.
Minister Jones noted that all of these changes will be complemented by replacing statements of advice (SOAs) with an advice record that provides clients with “helpful information in plain English”.
“The record has to be clear and concise and effective and actually help the clients make an informed decision about the advice that they have received, and it’s pretty straightforward,” the minister said.
Alongside a revamp in SOAs, a modernised and flexible best interests duty will apply to all providers of advice and will at its core have the existing primary obligation to act in the best interests of the client and to prioritise the interests of the client in the event of a conflict.
The updated standard will provide clearer legislative support for scaled or limited scope advice where this meets the client’s objectives and needs, and for advice where the advice provider has limited, but relevant, information.
As announced in June 2023, the existing best interests duty “safe harbour” steps will be removed, while the requirement to provide appropriate advice will be retained.
