In June 2023, the Albanese government released its long-awaited response to the 2022 Quality of Advice Review. Conducted by Allens lawyer Michelle Levy, the final report from the review was handed down in February 2023. It recommended a number of significant changes to the legal framework for financial advice, including amending the current best interests duty and doing away with statements of advice (SOAs).1
Below, we detail some of the key actions the government will take in response to the report. For more information on the report’s recommendations, see our previous article.
Removal of safe harbour
The government has accepted the report’s recommendation to remove the safe harbour steps that are currently an ASIC requirement for advisers to prove they have complied with the existing best interests duty.
This was contained in Recommendation 5 of the report, but the government says it wants to consult on the rest of the recommendation, which suggests the current best interests duty be replaced with a less prescriptive statutory duty.2
Ongoing fee arrangements
The government has accepted Recommendation 8 of the report3 to use a single consent form for client permission to deduct annual advice fees, rather than the several forms needed at the moment.
The government has accepted Recommendation 9 of the report ‘in principle’2, agreeing to replace statements of advice and records of advice with a requirement for advisers to maintain complete records of the provided and to provide written advice on request by the client. Consultation will occur to determine exactly what these record keeping requirements will be.
The government has accepted Recommendation 13.7 of the report, which proposed that risk advice commissions should be allowed to continue and be retained at their current levels.1 As part of this recommendation, standardised consent requirements will be introduced for life insurance commissions.2
While the above recommendations have all been prioritised in ‘stream one’ of the government’s response to the report, Assistant Treasurer Stephen Jones indicated that more detailed industry consultation would be needed on a number of the other recommendations.3
These include Recommendation 1 – broadening the current definition of personal advice; Recommendation 2 – removing the general advice warning; and Recommendation 4 – introducing a ‘good advice duty’.
According to a statement from Assistant Treasurer Stephen Jones, the consultation “will test how these proposals might operate under different advice models, including digital advice models, and across sectors”.
This consultation will be finalised later in 2023, Mr Jones said.
The Financial Advice Association of Australia has suggested the reforms to compliance requirements could bring more advisers back to the industry.
“When I speak to advisers that have made a decision to leave, the amount of red tape and paperwork that’s involved in the role is cited by most of them as being very frustrating”, FAAA chief executive Sarah Abood told the Australian.
“If we are able to deliver on these recommendations that would change, and I am certainly hopeful some advisers who made a decision to leave might rethink that.”4
The Financial Services Council has also welcomed the government’s decision to focus on “unnecessary and costly regulation” in its response to the report.
“The government is right to prioritise its ‘stream one’ reforms, which will lower the cost of providing financial advice and improve consumers’ experience when receiving advice,” FSC chief executive Blake Briggs said.5
1 Quality of Advice Review final report. Treasury, December 2022
2 Delivering Better Financial Outcomes detailed overview. Treasury, June 2023
3 Delivering better financial outcomes – roadmap for financial advice reform. The Hon Stephen Jones MP, Assistant Treasurer and Minister for Financial Services, 13 June 2023
4 Plans to reduce red tape could boost adviser numbers despite concerns over competition. The Australian, 14 June 2023
5 Media Release: Government commits to reduce financial advice red tape. Financial Services Council, 13 June 2023
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