Cumbersome Statements of Advice are on their way out, to be replaced with new Client Advice Records, according to draft legislation that will deliver the first part of the second tranche of the Government’s Delivering Better Financial Outcomes (DBFO) reform package.
A statement released by the Government notes the first components of this next tranche of legislation:
- Replace the Statement of Advice with what it describes as a more fit‑for‑purpose client advice record
- Provide clear rules on what advice topics can be collectively charged for via superannuation
- Allow superannuation funds to provide targeted prompts to members to drive greater engagement with superannuation at key life stages
The term ‘Client Advice Record’ will strike a familiar note with many advisers and other industry stakeholders who were active in the sector during the 1990s and early 2000s, when Customer Advice Records were the precursor to what became Statements of Advice.
Explanatory notes accompanying the draft legislation outline the main difference between the new CAR and SoAs is that record-keeping and proof of compliance with statutory requirements can be detailed elsewhere. Ahead of additional detail, it notes:
“While the circumstances in which a CAR must be provided to a client remain the same as under the current SoA requirements, the presentation and content requirements are modified to ensure the CAR supports the client to make an informed decision about the advice provided. In line with the current arrangements for an SoA, a CAR may be the means by which the advice is provided or a separate record of the advice. This obligation is separate to the record-keeping and proof of compliance obligations…”
…the record-keeping requirements are purposefully distinct from the CAR requirements to ensure that the CAR is focused on supporting the client to make decisions about the advice
The explanatory notes add that the record-keeping requirements are purposefully distinct from the CAR requirements to ensure that the CAR is focused on supporting the client to make decisions about the advice, rather than demonstrating the process the provider has performed to meet their regulatory obligations.
It says this contrasts with the SoA which can contain information relevant to record-keeping and proof of compliance.
…the purpose of the measures …is about cutting red tape that adds to cost without providing a benefit to consumers
According to outgoing Financial Services Minister, Stephen Jones, the purpose of the measures contained in DBFO Tranche 2 “…is about cutting red tape that adds to cost without providing a benefit to consumers.” The minister notes the outcome “…will also expand access to financial advice about savings, retirement and insurance for all Australians.”
The same statement notes the Government continues to develop legislation to modernise the best interests duty and create a new class of adviser. It emphasises that reforming the best interests duty and removing the safe harbour steps will provide advisers with confidence to deliver appropriately scaled advice.
While not included in this next set of measures, the minister stresses the new class of adviser is also vital to allowing life insurers, financial advice licensees, superannuation funds and other institutions to expand the supply of quality and affordable advice to consumers.
He says the remaining elements of the package will be consulted on and combined with these new measures already announced and will be introduced into Parliament as a single package.
Consultation is available on the Treasury website and closes on 2 May 2025. Click here to review the draft legislation.
Had a look on the Treasury website. Anyone who thinks that there will be less work in the new version of the CAR is in for a surprise. When you read the statements you can see ASIC working to interpret the proposed new structure and wordings to impose the same requirements on advisers
And licensees worried about keeping their PI premiums down will do what they always do – totally misread the intent of the legislation and impose their particular Interpretation of what ASIC would want.
Just another boondoggle. The next step will be ASIC coming up with a draft (sample)life risk CAR like the sample risk SOA they produced nearly 8 years ago where the commission was splashed across the front page.
Three words: DECK. CHAIRS. TITANIC.
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