Financial Services Minister Stephen Jones’ prepared speech outlining that the Government would adopt 14 of the QoA Review Recommendations set the financial services sector abuzz earlier this week, ahead of a far more detailed statement putting into context which of Michelle Levy’s 22 recommendations were to be accepted in full or in principle and where more consultation was needed.
Jones’ later statement and Treasury’s Detailed Overview paper also laid out clearly that final responses on the Delivering Better Financial Outcomes package are expected before the end of the year (see also: SoAs Replaced, Risk Commissions Retained).
Below are some of the detailed highlights from the first work stream which the Treasury paper headlines as Removing regulatory red tape that adds to the cost of advice without benefiting consumers.
Best Interests Duty – Consultation on Implementation
The “Safe Harbour” steps, originally designed to protect financial advisors, will be removed from the Best Interest Duty with consultation to determine implementation details and the implications of adopting the remaining parts of recommendation 5 (accept in principle part of recommendation 5).
Single Form – No Fee Disclosure Statement
Ongoing fee renewal and consent requirements will be streamlined into a single form, and the requirement to provide a fee disclosure statement will be removed (accept recommendation 8).
SoA – Consultation on Final Design
Statements of Advice will be replaced with an advice record that is more fit for purpose, with consultation to determine the final design of the replacement (accept in principle recommendation 9).
Flexibility on Financial Service Guide Requirements
More flexibility will be provided in how financial service guide requirements can be met (accept recommendation 10).
Classifying Consumers
Standardised consumer consent requirements will be introduced to classify a consumer as a wholesale or sophisticated client (accept in principle recommendation 11).
Conflicted Remuneration
Certain exemptions to the ban on conflicted remuneration will be simplified and some removed, including:
- Clarifying that monetary or non monetary benefits given by a client are not conflicted remuneration along with the removal of consequential exceptions (accept recommendations 13.1 and 13.3)
- Removing an exception to conflicted remuneration rules for the issue of financial products where advice has not been provided in the previous 12 months (accept recommendation 13.4)
- Removing an exception to conflicted remuneration rules for agents or employees of Australian Authorised Deposit Taking Institutions (accept recommendation 13.5)
Consumer Consent
Standardised consumer consent requirements will be introduced for life, general and consumer credit insurance commissions (accept recommendations 13.7 – 13.9).
Under the headline Expand access to retirement income advice the Treasury paper lays out:
Super funds to provide more retirement advice
The restrictions on collective charging will be amended to allow superannuation funds to provide more retirement advice and information to their members (accept in principle recommendation 6).
This will work with industry to consider adopting, and tailoring as needed, recommendations 1-4, the remaining parts of recommendation 5, and recommendations 12.1 and 12.2 to implement recommendation 6.
Legal Clarity
Superannuation trustees will be provided with legal clarity around current practices for the payment of adviser service fees (accept in principle recommendation 7).
Exploring New Channels for Advice – Industry Consultation
The document lays out that in conjunction with implementing recommendation 6, the Government will explore expanding the provision of advice by other institutions by consulting industry and consumer stakeholders on recommendations to:
- Broaden the definition of personal advice (recommendation 1)
- Remove the general advice warning (recommendation 2)
- Allow non relevant providers to provide personal advice (recommendation 3)
- Introduce a good advice duty (recommendation 4)
- Amend the Design and Distribution Obligations (recommendations 12.1 and 12.2)
Finalising Implementation Details
Treasury says this consultation will also finalise implementation details for:
- The design of the replacement for Statements of Advice
- The implementation details and the implications of adopting the remaining parts of recommendation 5
- The Financial Adviser Code of Ethics
- Expanding access to affordable retirement advice
Consultation – Digital Advice and Policy Design
Treasury notes Government consultation will test how these proposals might operate under different advice models, including digital advice models, and across sectors. Consultation will also consider practical policy design and implementation issues, including in relation to consumer protections.
Click here for Minister Jones’ full statement.
