The government will press ahead with plans to introduce the proposed new class of adviser (NCA), but will limit the people to whom they can provide advice to members of Australian Prudential Regulation Authority (APRA)-regulated superannuation funds and customers of life insurers.
The move will see the government return to enacting a wider set of reforms that are part of the second tranche of the Delivering Better Financial Outcomes (DBFO) program that have been on hold while the impact of the collapse of the Shield and First Guardian master funds has played out.
During a recent speech at the National Press Club, Assistant Treasurer and Financial Services Minister Daniel Mulino outlined what areas of the DBFO regime will be taken forward, stating changes to allow targeted superannuation prompts, intra-fund charging and streamlined statements of advice will also be introduced.
“We will proceed with the NCA, initially limited to APRA-regulated superannuation funds and life insurers, and supported by strong safeguards against vertical integration through prohibitions on commissions, bonuses and volume-based payments,” Mulino said.
“We will review the scope of the NCA in three years to determine how it is performing and whether we should expand it further.”
In commenting on why banks were unable to employ advisers under this model, he added the second stage of the DBFO was driven by plans to assist superannuation fund members access advice where the current laws prevented their fund from providing that information.
“The DBFO NCA was primarily focused, from a policy rationale point of view, on the super system and on life insurance and situations where basic guidance and answers to questions would have provided people with assistance in getting much better outcomes,” he noted.
“Limiting it to APRA[-regulated entities] for the first three years is a way of making sure we have a really clear understanding of how that NCA is rolling out. It is going to be less regulated than the full-blown financial advice, which is a really critical part of our system.”
In terms of other protections for super fund members, he said work conducted by the Australian Securities and Investments Commission on advice fee deductions related to super switching found large fees had been charged to members with low balances and the government would introduce an obligation on fund trustees to ensure compliance with advice fee deduction caps for members.
Other changes to the advice sector include simplifying the best interest duty by retaining existing obligations, but removing the broadest safe-harbour step that prevents the provision of scaled advice, a review of the Financial Planner and Adviser Code of Ethics and further education reforms for new advisers.
The announcements were welcomed by Financial Advice Association Australia chief executive Sarah Abood, but she called for the roll out of the NCA across the advice sector.
“Improving access to simple, affordable advice is essential to help Australians understand complex financial products and make informed decisions,” Abood said.
“As such, we are disappointed the NCA will be limited to select large institutions. Consumers need choice in how they access this simpler, lower-cost form of advice.
“It should be an option for financial advice practices to allow them to help more Australians.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason