The federal government will create a new class of financial advice providers who will be employees of financial institutions, but will carry a different title and hold lower education standards than those practitioners currently working in the financial advice sector.
The new class of advisers is part of government plans announced by Financial Services Minister Stephen Jones to introduce further recommendations from the Quality of Advice Review (QAR), including replacing statements of advice with shorter records of advice and introducing a revised best interests duty that no longer carries safe harbour provisions.
In a speech given at Parliament House in Canberra today, Jones said professional advisers were unable to scale up their businesses in a way that would provide greater access to advice for millions of people and the government’s plans to expand the role of superannuation funds to provide it would also apply to life and general insurers and banks.
“This is a pragmatic step that will expand the provision of personal advice to improve consumer outcomes,” he said.
“Under our model, there will be a new class of financial advisers who will fill the advice gap by advising on less complex matters.
“It is expected that this new class – to be termed ‘qualified advisers’ – will generally be employees of licensed financial institutions.”
He added qualified advisers would focus on providing simple financial advice, be prohibited from charging fees and receiving commissions and required to meet a government-mandated education standard.
“The exact level of education will be determined in time, but a minimum standard of a diploma may be the right balance to be less onerous than the requirements for professional advisers,” he said, noting advice licensees would be fully responsible for advice provided by employees.
He said all sources of advice would operate under a ‘modernised’ best interests duty that retained components of the previous duty, but removed the safe harbour requirements.
“These [safe harbour] steps have made advice more expensive through a combination of law, regulatory approach and a risk-averse industry. Coupled with unreadable and unhelpful statements of advice, it is clear that significant reform is needed to support consumers,” he said.
“The government will modernise the best interests duty. It will maintain the requirement for advisers to give priority to their client’s interests where there may be a conflict and it will retain the necessity for advice to be appropriate and fit-for-purpose.”
Legislation to implement the model would be developed in 2024, with Jones highlighting the changes finalise the government’s response to the QAR.
In response to the government’s announcement, opposition treasury spokesman Angus Taylor said the government had been slow to implement the QAR recommendations and what was put forward did not have concrete timelines for delivery and left the advice sector with a lack of regulatory certainty.
“The government was handed a considered and timely review by Ms Michelle Levy that would have provided safer, simpler and cheaper financial advice to all Australians,” Taylor said.
“Instead, the government has delayed, second guessed the reviewer and after failing to deliver a response in the budget, finally delivered a full response to what should be a seminal productivity roadmap for our financial advice sector.”
He added the opposition would closely examine the government’s proposal before finalising its position, including any “deviations” from the QAR to ensure the new advice model provided good outcomes for consumers and the advice industry.
