The Financial Services Minister recently announced the government’s response to the Quality of Advice Review (QAR) – adopting the bulk of the recommendations immediately, with legislation to come in the second half of 2023 and early 2024. From the 22 recommendations made, the Government will adopt 14 recommendations in full or in principle.
To give you some background behind the Quality of Advice Review (QAR) and why there was a need for the review in the first place undertaken by the government.
Over the past decade or so, the financial advice sector has undergone significant change. In response to, sadly, bad practices in the sector, lead to calls for ever more regulatory reforms to protect Australians from poor investments and inappropriate financial advice.
These reforms often targeted a specific part of the problem. Whilst well-intentioned, this has resulted in financial advice has become heavily regulated over this period including excessive educational requirements.
As a consequence of these reforms, the industry has seen a mass departure of advisers. Over 10,000 financial advisers have left the industry since 2019, nearly 40%. Overlapping regulations, the shrinking adviser pool and rising costs have now been acknowledged as a problem.
Stephen Jones, Minister for Financial Services stated that “I will be introducing legislation to Parliament to follow through on the Government’s election commitment to create a pathway for experienced advisers with a clean record to continue practising without the need to undertake further education. This will soften the landing as the sector transitions towards a fully professional industry, without compromising standards”.
The implementation of recommendations is being implemented over 3 streams of work.
We have detailed each of the streams below:
The first stream of work will streamline the process of advising on current channels.
The second stream focuses on the most significant burning deck in the financial advice space - Retirement incomes.
The final stream will examine the role of other institutions – banks and insurers – in providing more information and advice.
The Government will explore expanding the provision of advice by other institutions by consulting industry and consumer stakeholders on recommendations to:
This consultation will also finalise implementation details for:
Expanding access to affordable retirement advice.
Moving ahead, the Government has indicated consultation will commence by the end of June this year, and will simultaneously look at implementation details of particular streams.
Some measures may just move to Exposure Draft legislation (consent requirements, FSGs or removal of exemptions) others will require implementation detail consultation (e.g. what does a reduced Statement of Advice look like, outright or partial removal of the safe harbour steps). This will also consider what rules need to be in place for superannuation funds to provide more personal advice and whether this model can be extended to bank fund managers and insurers.
The Financial Services Council will engage the Government as it consults on the three streams of reform and submissions will be developed with input from relevant working groups and board committees.
Watch this space for further updates as they are announced.
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