The waiting game

The final Quality of Advice Review report was submitted to the government in December last year. Kate Cowling provides an update on where the process currently stands and industry reaction to the recommendations put forward.

The findings of the Quality of Advice Review are now in public hands, but the federal government says it has more work to do before it can implement the recommendations. While some industry groups have urged quick action, others say Treasury’s next steps are an opportunity to correct some glaring omissions.

When Assistant Treasurer and Financial Services Minister Stephen Jones publicly released the Quality of Advice Review final report last month, adviser groups hoped we’d see the swift repair of several issues plaguing the profession and curbing access to advice.

Michelle Levy’s review investigated how to improve the quality, affordability and availability of advice at a time where demand for professional financial help has skyrocketed, but fewer than 16,000 advisers remain.

The remedial blueprint lays out 22 recommendations, which include replacing the best interest duty with a statutory duty, introducing a ‘good advice’ provision and retiring the statement of advice (SOA) in favour of client records, which would be made available upon request.

The report also proposes simplifying fee consent arrangements to a single form and allowing advisers to choose to replace financial services guides (FSG) with information on their website, if they wish.

While industry groups say several of the recommendations would reduce the compliance burden faced by advisers, Levy stressed her remit was to improve access and cost for consumers.

“If implemented, the recommendations will focus the attention of the law on what consumers want and need,” she says in the report.

“It will give providers of advice greater flexibility and more room for creativity.

“More kinds of advice will be able to flourish and disclosure and reporting will turn on what consumers want and need.”

The government’s next steps

“In response to the 267-page document, Jones said he plans to “consult widely” on the report’s recommendations and stressed “anyone with an interest in financial advice should read it and make their views known”.

The government’s plan to seek more feedback provoked a mix of confusion, frustration and support. The confusion and frustration largely relate to the 10-month process and the perception that further inquiry will cover the same territory. Supporters of further review, meanwhile, say it could provide clarity about unanswered questions and potentially correct omissions.

Levy admitted to delegates at the SMSF Association National Conference she was “a bit puzzled” by the decision to conduct further consultation.

In her report, she said she had “read hundreds of submissions and spoken to as many people”.

At the time of writing, Jones has not yet shared how the next stage will work or released a timeframe.

Meanwhile, government representatives have been probed in parliament about why another round of consultation is warranted.

“I think it is useful for the government to understand the feedback on those recommendations,” Senator Katy Gallagher told the Senate Economics Legislation Committee last month.

“It would assist in decision-making in formulating our response. There are a whole range of reviews where you do that.”

Several industry groups say the next round of consultation provides an opportunity to lay out what they see as the best implementation pathway and to point out where Treasury could go further to improve advice access.

The profession reacts: quick wins and question marks

Financial Planning Association of Australia chief executive Sarah Abood says her members’ response to the final report has been “broadly positive”, with excitement about changes that could happen quickly and easily to improve both the consumer and adviser landscape.

“I think there’s a recognition [within the report] that there’s been way too much red tape,” Abood observes.

She suggests several changes could happen fairly easily and quickly, including the recommendations around SOAs, consent forms and FSGs.

Financial Services Council chief executive Blake Briggs similarly believes there are a number of areas where change could be applied rapidly, with significant benefits for Australians.

“Quick wins like abolishing the safe harbour steps, enabling digital advice and reducing documentation requirements have broad industry support and would go a long way to reducing the cost of advice for consumers,” Briggs says.

In other areas of the report, Abood acknowledges more discussion and clarity is needed. For example, definitions of scoped and simple advice may take more time to work through.

“We need to know more about what exactly constitutes simple advice,” she says.

“Let’s agree on what’s simple.”

One of the more controversial proposals from the report involves ‘non-relevant providers’, that is, people who aren’t financial advisers/planners or stockbrokers being able to offer personal advice in certain circumstances.

In the final report, Levy concludes the scope for who can provide advice is currently too limited.

“If the regulatory framework continues to require all personal advice to be given by a financial adviser, where it is given by an individual, it would exacerbate the existing accessibility and affordability issues which are part of the reasons for this review,” she explains.

“Happily, I do not think it is necessary or in the interests of consumers to require all personal advice to be given by a financial adviser.”

Abood feels a bit more clarity is needed on where non-relevant providers can step in.

“People are open to it, but I think some guard rails are needed,” she says.

Association of Financial Advisers chief executive Phil Anderson indicates his members have expressed concern about non-relevant providers creating an “uneven playing field” after advisers have had to undertake extensive education and training requirements.

“It’s created angst because it’s perceived that non-relevant providers providing personal financial advice will be cutting into the market of advisers who traditionally provide advice … and there are fears it could lead to further scandals that could have blowback on the advice profession,” Anderson reveals.

However, he doesn’t believe those fears will materialise.

“My view on it is that advisers have no shortage of clients to choose from. In many cases, advisers are needing to say ‘no’ on a regular basis to potential new clients,” he says.

“I think the level playing field issue is an impo rtant one, but to some extent is misunderstood.”

He argues we currently have a threetier regime, with general advice, personal advice from relevant advisers and the regime applying to wholesale clients.

“What we’re now talking about is changing general advice to personal advice provided by non-relevant providers and my argument is that the standard is being significantly increased from the standard that applies to general advice providers right now,” he says.

Accountants: the missing piece of the puzzle

While the final Quality of Advice Review report carves out a role for non-relevant providers, accountants have argued their potential to play a bigger part in the advice space has been largely overlooked.

The report acknowledges accountants’ tax expertise, but says SMSF matters, such as setting up and winding up these types of funds, are broader and require further regulation.

“Advice on superannuation products, including interests in SMSFs, is financial product advice and it should be regulated as financial product advice. I do not see any reason for making an exception,” Levy notes.

She suggests SMSF clients should receive the same level of protection as other advice clients, such as the good advice provision, statutory best interests and the ability to make complaints to the Australian Financial Complaints Authority.

Chartered Accountants Australia and New Zealand superannuation and financial services leader Tony Negline says Levy acknowledges the limited licensing framework was a failed model, but stopped short of recommending regulatory change in relation to accountants’ ability to advise. He labels this as disappointing.

“We would have preferred some recommendations to give certainty to licensed accountants who are going about their normal, everyday work, so they are not accidentally falling into providing unlicensed advice,” Negline says.

He points out it makes sense to give accountants more breadth because they are already qualified to a professional level and have an existing base of small business clients.

“It would help a lot if they could provide relatively straightforward advice, without falling foul of the law,” he says.

“We have this great unmet advice problem in the nation and are not tapping into the skills, knowledge of accountants.”

According to Negline, it is possible accountants could fall into the non-relevant provider category in some cases, but they would still need more certainty around the definitions to say that for sure.

SMSF Association chief executive Peter Burgess agrees there is a missed opportunity to allow accountants to assist consumers more, especially with some aspects of SMSFs.

“We think it’s important that accountants are able to provide some form of limited self-managed super advice ... specifically registered tax agents who hold a certificate of public practice and who do have the competencies to provide SMSF advice,” Burgess explains.

“We think there’s merit in the advice framework recognising those individuals.”

He points out the current limited licensing regime is no longer “fit for purpose”.

Most accountants who applied for limited licences have since surrendered them, with Adviser Ratings data showing there are fewer than 500 of these practitioners remaining.

“It’s expensive for accountants to hold that licence, they have to satisfy continuing professional development obligations and the rules don’t differentiate between a limited licensee and a full licensee,” he observes.

According to Burgess, the education standards are another barrier because they relate more directly to advisers’ skill sets than accountants’ areas of practice.

“The education standards require accountants to show they’ve got competencies in a broad range of areas, many of which don’t relate to the business they’re providing,” he notes.

“In most cases, accountants are not looking to provide full advice; they’re looking to provide specific advice around SMSFs that may be integral to business structure.”

In terms of how he would like to see accountants recognised, Burgess thinks it would be logical to have a separate category of adviser who was able to give advice about SMSFs in defined circumstances, without the hurdles of limited licensing.

Burgess and Negline say they both plan to make their views known to Treasury.

Navigating an uncertain timeline

While professional groups have been united in their calls for swift action on the Quality of Advice Review, they concede the government has been tight lipped about its timeline.

“We’d love to have a deadline, but we don’t know. The Minister hasn’t wanted to be drawn on the subject,” Abood says.

“The fear is if we have too much consultation, it will take too long for the recommendations to be implemented.”

Briggs has similarly urged Canberra to move quickly for the sake of both consumers with unmet advice needs and the profession itself.

“Implementing the report’s recommendations must be the priority for the Assistant Treasurer to keep faith with the industry and deliver on the advice profession’s potential to improve the financial wellbeing of millions of Australians,” he suggests.

Anderson indicates he expects seeing some action soon.

“I think it’s going to happen relatively quickly,” he says.

“Our natural response is to say ‘let’s just get on with it’, but we are conscious that some of the decisions are important ones and there needs to consideration of whether there needs to be appropriate controls.”

While he acknowledges there have been some vocal opponents to some of the recommendations, he proposes it is still better to have an imperfect blueprint now than to wait much longer for something better.

“This is the big opportunity for financial advice as a profession to make fundamental changes to address some of the underlying issues. There’s a huge consumer benefit here... if we don’t grab this opportunity, when will the next opportunity be?” he asks.