The federal government has released the draft terms of reference for its pending review of the quality of financial advice and will examine the retention of the safe harbour provisions in the Corporations Act, the scope and boundaries of advice and the type of advice accountants can provide in regards to superannuation.
The draft terms indicate the government will investigate how to reduce compliance obligations on advisers to reduce the cost of advice, noting “the costs of compliance by businesses are ultimately borne by consumers and serve as an impediment to consumers’ access to quality advice”.
The draft terms also indicate rules-based regulation may be replaced by principles-based regulation and advice documents may be made simpler and less complex for consumers.
Specifically, the review will examine the terminology of ‘financial product advice’, ‘general advice’ and ‘personal advice’ and what they mean for consumers, as well as the role and limits of scaled and intra-fund advice.
In keeping with a recommendation from the financial services royal commission, the review will call for an examination of the work of the Tax Practitioners Board and consideration of the advice accountants can provide in regards to superannuation.
“Having recommended the regulatory burden on tax (financial) advisers is to be reduced, the review believes it is reasonable that a similar level playing field should be considered for accountants,” the draft terms stated.
“The review therefore recommends the government initiate a specific review of what advice accountants can and cannot give in respect of superannuation and which accountants that might apply to. Such a review could perhaps be undertaken by the Productivity Commission.”
Additionally, following a recommendation from the royal commission, the retention of the safe harbour provision for the best interests duty will be examined following royal commissioner Kenneth Hayne’s comments that “unless there is a clear justification for retaining that provision, it should be repealed”.
The review, according to the draft terms will also examine recent reforms to introduce annual renewals for ongoing fee arrangements and will incorporate the findings from the Australian Securities and Investments Commission’s review of life insurance commissions.
The draft terms, available from Treasury, are open for consultation until 4 February 2022. The review will be conducted in 2022 by an independent reviewer and supported by a secretariat based in Treasury, which will receive submissions from the public and consult with stakeholders, including consumers, industry and regulators, before providing a final report by 16 December 2022.
