The recommendations in the Quality of Advice Review (QAR) report to change the best interest duty and introduce a good advice duty follow on from the 2019 financial services royal commission and focus on consumer outcomes ahead of advice processes, according to the Financial Services Council (FSC).
FSC chief executive Blake Briggs said the report was “a blueprint for reform of the advice industry that puts consumers first” and “outlined sensible reforms consistent with the detailed and evidence-based policy research conducted by the FSC and our members”.
Briggs said the final report, released yesterday, put forward the principle that financial advice should be focusing on consumer outcomes and not the advice process – a position also outlined by review chair Michelle Levy in a proposals paper released in mid-2022.
“These recommendations can achieve this objective in a way that ensures consumers receive more, not less protection,” Briggs said.
“The final report recommends new consumer protections by expanding what is personal advice and creating a ‘good advice’ duty to ensure advice is ‘fit for purpose’.
“The move to a ‘good advice’ duty draws on the work of commissioner Hayne’s financial services royal commission and would align the advice framework with legal protections in the Australian consumer law.”
He was dismissive of comments that expanding the definition of advice would lead to poor advice, noting consumer protections would be in effect at the same time.
“The thorough analysis by Michelle Levy and her Treasury review team means the scare campaign about a return to the ‘bad old days’ of conflicted advice that failed to put the interests of consumers first is dead on arrival,” he said.
“The final report rightly concludes that since the introduction of the design and distribution obligations, there is more scope to allow more forms of personal advice.”
SMSF Association chief executive John Maroney welcomed the report’s release and noted its content reflected the different aspects of the advice sector.
“We thank the Assistant Treasurer and Minister for Financial Services, Stephen Jones, for releasing the [QoA Review] final report, believing the issues surrounding access to affordable and quality financial advice have been well documented throughout the report,” Maroney said.
“We look forward to consulting with the government on the review and discussing many of the 22 recommendations in this report.”
He added that while parts of the terms of reference limited the scope of the review, the size of the report and the issues addressed within highlight the diversity and complexity of the financial advice sector.
Advisers Association chief executive Neil Macdonald said the report’s recommendations to allow ‘non-relevant providers’, such as product providers, superannuation funds and banks, to provide personal advice should be opened to further industry consultation.
“There is no doubt that there is a huge accessibility issue around financial advice in Australia, but what we want to avoid is a situation whereby consumers think they are getting personal financial advice from a qualified financial adviser with a fiduciary best interests duty, when in fact they are receiving only product information and guidance from someone representing an entity with a vested interest,” Macdonald said.
The Financial Planning Association was also supportive of the report’s recommendations and singled out three recommendations, related to fee consent, the supply of statements of advice and the retention of life insurance commissions, as measures that could be introduced quickly.
