Industry groups have generally welcomed the Government’s Quality of Advice Review decisions, albeit with a few caveats.
FAAA Response
The FAAA congratulated Financial Services Minister Steven Jones on his “strong response” to the Review.
CEO Sarah Abood says it’s particularly pleased to see the support for recommendations “…such as the removal of Fee Disclosure Statements, rationalisation of fee consent, removal of the Best Interests Duty Safe Harbour steps and in-principle support for a major overhaul of financial advice documentation.”
Abood notes that the Government has also “…provided certainty with the continuation of life insurance commissions, whilst introducing a consent obligation that is covered through existing client approval arrangements.”
“We think that this first package of reforms will be a big step forward in helping advisers deliver more advice for Australians.”
She adds there are other recommendations that the Government has accepted require more consultation “…and how best to safeguard the advice Australians will receive from their super funds is an important part of this.”
CALI – Important to Allow Life Insurers to Provide Limited Advice
The Council of Australian Life Insurers is supportive of the proposed reforms to allow superannuation trustees to provide advice to working Australians, including advice about life insurance held within their superannuation.
The council believes “…it is important that Government legislation also allows life insurers to provide limited advice to Australians directly when they ask for it. Like superannuation trustees, life insurers have additional legal duties to act in good faith and prioritise the interests of their customers.”
“CALI CEO Christine Cupitt says this announcement is a good start “…but more needs to be done to help solve the unmet financial advice need for working Australians, not just those people approaching retirement.
…there are just 1,000 [advisers] …helping people navigate life insurance products, which makes reforms for life insurance advice an urgent priority…
She notes that for many Australians, getting advice is too expensive or too inaccessible “…with just 16,000 financial advisers to turn to across the country. Of these advisers, there are just 1,000 who are helping people navigate life insurance products, which makes reforms for life insurance advice an urgent priority.”
Where a consumer does not wish to engage a financial adviser, CALI believes the law should enable life insurers to provide limited life insurance advice.
The organisation also strongly supports the Government’s decision to remove red tape and improve transparency around the commissions advisers receive on products.
TAL Response
Life insurer TAL has expressed similar thoughts to the FAAA and CALI in its own initial statement in response to the Minister’s announcement this week.
It characterises Minister Jones’ decision as an important initial step towards reform to help more Australians access high-quality and affordable financial advice, but that there remains more work to do to better serve consumers.
Similar to the FAAA and CALI, TAL also takes aim at the Minister’s Stream Three agenda, which includes exploring new channels for the delivery of financial advice by other financial institutions: “We look forward to constructively engaging with government and all stakeholders on important reform that would enable life insurers to better meet their customers’ simple advice needs, such as advising customers on their policy options to support affordability.”
The insurer says implementing Stream Three reforms would allow customers to engage more fully with their life insurer to ensure their insurance is fit for purpose, as their needs change, and against the backdrop of increased cost-of-living pressures
FSC – Right to Prioritise Stream One Reforms
Meanwhile, the FSC also welcomed the Government’s response and its CEO, Blake Briggs says 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.”
He says the FSC looks forward to working with the Government to deliver on its commitment to introduce legislation before the end of this year “…including strengthening consumer protections by tightening exemptions to the ban on conflicted remuneration and standardising consumer consents for determining a ‘sophisticated’ client.”
The FSC notes the Government has also outlined a medium-term plan to expand access to financial advice around retirement and explore new channels for advice.
Briggs says that in its second and third streams “…the Government is at risk of unnecessarily restricting the number of institutions that can invest in new advice solutions, which could result in too many Australians missing out on quality financial advice at key stages of life.”
He adds that superannuation funds will play an important role in providing retirement advice “…however if the Government narrowly implements key reforms they could fail to attract the industry investment that is necessary to deliver quality advice to the millions of Australians that would benefit from it at different stages of life.”
He says the QoA Review’s recommendations for a ‘good advice’ duty and allowing ‘non-relevant providers’ to provide personal advice “…were designed to have broad application beyond the superannuation sector, to encourage industry investment and ensure a level, competitive playing field.”
It welcomes the Government’s commitment to further consult and “…encourages the Government to remain open to applying the Quality of Advice Review recommendations beyond the superannuation sector.”
SoA Decision Particularly Welcome
The Advisers Association is broadly supportive of the fact that the Government has indicated it will accept 14 of the QAR recommendations with CEO Neil Macdonald saying the association is pleased the Government is looking to remove regulatory red tape “…and particularly welcome that Statements of Advice may be replaced with an advice record that is more fit-for-purpose,”
TAA is also keen for some of the recommendations to be legislated quickly and encourages the Government to look for a legislative slot to enact the recommendations as soon as possible.
If legislation cannot be enacted quickly, TAA would like to see Government consider a facilitative, ‘no action’ approach until it is enacted.
‘We think some of the recommendations, particularly around addressing regulatory red tape, could be addressed quickly, if the Government was prepared to adopt a facilitative ‘no action’ approach for 12 months,” Macdonald says.
A Sensible and Measured Approach
CEO of consumer group, CHOICE, Alan Kirkland, has also welcomed the Government’s “…sensible and measured approach to improving consumer outcomes in financial advice. If designed correctly, these reforms will meaningfully improve access to advice, without watering down important consumer protections.”
He says the group is pleased the Government has heard the concerns of consumer groups “…about the more radical and harmful recommendations of the QoA Review. The recommendations that would have slashed consumer protections for advice provided by banks, insurers and fund managers were criticised by a broad range of stakeholders,” he says.
However he notes the Government has not accepted any of those recommendations at this stage.
Sounds like self interest CALI. Insurers don’t get it. Of course a product manufacturer should be able to sell their own product to the public but to do this the legislation needs to change dramatically because currently how could an employee of a life company satisfy best interest. Seems impossible.
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