Associations divided on impact of Jones’ QAR advice reforms
While the Financial Services Council (FSC) largely supports the final tranche of Delivering Better Financial Outcomes reforms, the Financial Advice Association of Australia (FAAA) is “deeply concerned” about its negative implications on the industry.
Minister for Financial Services Stephen Jones unveiled the final response to the Quality of Advice Review on 7 December in Canberra.
Within this announcement, Jones outlined a new classification called ‘qualified advisers’ to enable licensed financial institutions including banks and insurers to provide simple advice.
“The government will expand the role of superannuation funds in providing advice to their members. Today, I can go further and announce that this model will apply across all financial institutions: superannuation funds, life and general insurers and banks,” Jones said.
Unlike bank advisers pre-Hayne Royal Commission, this new type of adviser will be prohibited from charging a fee and receiving commission.
In addition, Statements of Advice (SOAs) documents will now be replaced by an advice record that provides information in plain English.
“The record must be clear, concise and effective and actually help the client make an informed decision about the advice they have received,” Jones said.
They must also address the subject matter, the advice, the reasons for advice and the cost of advice as well as any benefits received by the adviser.
Industry reaction
In response, numerous industry bodies have provided a mixed reaction to these frameworks to remove safe harbour steps and introduce a new class of adviser.
The FAAA painted a worrying picture, saying it could wind the clock back five years.
“There is little detail available at this stage, but on the face of it we are deeply concerned at the direction of these announcements,” said Sarah Abood, chief executive of the FAAA.
Abood believes the reforms appear to invalidate the hard work and pain involved in forming the advice profession and winning consumers’ trust.
She continued: “Specifically, the Minister has announced that any financial institution will be able to provide personal financial advice to consumers, using people who are not financial advisers – yet who would be called “qualified advisers”.
“There is no detail on the qualifications that would be required, however they would be substantially less than what is currently required to provide financial advice. Thus, the proposed term is self-contradictory and extremely likely to confuse consumers.”
While the FAAA noted some positives in the announcement, such as shorter SOAs and removing safe harbour steps, it doubled down on the confusing effect the ‘qualified advisers’ classification will have on consumers.
“We will have plenty more to say on this in the days and weeks to come. In the meantime, we will be engaging members to ensure the final legislation delivers on the intent and goals of the review, to help consumers get the high-quality financial advice they need.”
Blake Briggs, FSC chief executive, offered a differing reaction and largely supported the reforms.
He said: “The government’s policy commitment to abolish the safe harbour steps and simplify SOAs are key to reducing the excessive regulatory cost burden on financial advice.”
According to FSC research, the removal of the safe harbour steps and simplifying disclosures could potentially decrease the cost of providing advice by nearly 40 per cent.
“Superannuation funds are an important source of advice for consumers, particularly as they approach retirement, and the government’s policy has the capacity to unlock industry investment in retirement advice and low-cost digital advice solutions,” Briggs continued.
“Every consumer has unique retirement needs and the government’s recent consultation on expanding the suite of retirement income products available to consumers will not be successful without greater access to personal advice at retirement.”
Renato Mota, Insignia Financial CEO, also welcomed the government’s final response to increase the accessibility of advice.
“We know Australians are looking for affordable, accessible financial guidance and we are excited at the potential these changes have to improve financial wellbeing for more Australians,” he commented.
“We’ve needed a broad advice continuum that considers the needs of many and reaches more people. The reduction of red tape and the introduction of a new class of qualified advisers alongside professional financial advisers across all financial institutions, including superannuation funds, are the right steps forward to deliver simple advice at scale and increase accessibility.”
The Stockbrokers and Investment Advisers Association (SIAA) shared its support for banks being included in the personal advice model, as well as insurers and super funds.
“We support financial institutions as well as superannuation funds being allowed to give customers simple, quality personal advice, with safeguards built in to ensure consumer protection. We are pleased to see that the Minister also recognises the important role that digital advice will play in increasing consumer access," said Judith Fox, SIAA chief executive.
“Replacing the compliance-focused statements of advice with a consumer-focused advice record that is in plain English and provides the information the consumer needs to make an informed decision is a great step forward, as is modernising the best interests duty to ensure customers receive helpful advice, including on single or limited scope issues."
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Jasmine Siljic
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The FSC is a lobby group for product providers; of course they'd support this weakening of the advice system.
Stephen Jones and the ALP are implementing a system where lower qualified individuals somehow get the title of "qualified adviser" and their role will be to serve their paymaster - not the client, but the product provider.
This is a terrible development for consumers and the industry.
The AIOFP who have been vocal supporters of Stephen Jones should be hanging their heads in shame.
Of course the FSC would support it, they have sided with the Govt. for the last 20 years and overseen all of the detriment to the Advice Profession along the way
Cookie cutter advice is now being entrenched within advice. Managed accounts started this, now robo advice coupled with this spells disaster for a "profession" that lacks professionalism.
What a load of poppycock. "help consumers get the high-quality financial advice they need" it is the big end of town getting their snout in there again and making out they are helping the little man. On one hand they say "each member has unique needs" then they put together some one year trained adviser to give them advice from the fund they work for. How can it be unbiased if the salary is paid by the firm NOT the client!! These new laws will take us back 15 years into banks giving advice and some funds just plying their wares under the guise of 'SIMPLE' advice. Wake up!
Perhaps the government might extend these measures to other professions whose services are also considered expensive for everyday consumers to access:-
1/. Qualified Solicitors @ $125 per hour versus Professional Solicitor @ $500 per hour
2/. Qualified Accountants @ $125 per hour versus Professional Accountants @ $500 per hour
3/. Qualified Engineers @ $125 per hour versus Professional Engineers @ $500 per hour
4/. Qualified Neurosurgeon @ $500 per hour versus Professional Neurosurgeon @ $3,000 per hour
Why is it that Financial Advisers are always the ones expected to work for less. Seriously!!!
It has me nonplussed how anyone thinks that a change to the SoA document requirements will lower fees? The time cost is in gathering and recording information, due diligence and research, crossing I's and T's, and making sure the file stacks up for the inevitable presentation to AFCA! The SoA is but a summary of everything that has taken place to that point! Like it or not costs will not reduce significantly amount to allow an entry point to professional advice for the masses. And, like it or not the SoA as it stands, is a valuable point of reference to reflect back on when determining if a clients circumstances remain the same, and if the started objectives are being met ongoing. Of all the changes I have experienced in my long career, I find this right up there with the most pointless and frustrating.
Absolutely agree with you on this Les. That's how I see it too. The client facing "new" SOA document might shrink down a little bit, but you're still going to need a very robust record of your advice construction method to "show your workings" when AFCA comes knocking.
Personally (and this is a pipe dream) I'd like a body like the FAAA to have a comprehensive library of IBR material that we could use in our existing SOAs (with the explicit blessing of our regulatory lords and masters) and shift away from the idea that a client needs to understands every minute detail of a recommendation, rather do they understand the substance of the recommendations, the major pros/cons and reasons why the advisor thinks they are appropriate.
That way you could have a pension commencement rec (for e.g.) that would look something like:
"We recommend you commence a pension with $X of your balance in your Y Super Fund, and drawn a pension of $Z per month in order to A reason, C reason.
For more info on conditions of release and accessing super refer to link 1
For more info on pensions refer to link 2
For more info on income streams and Services Australia benefits refer to link 3"
I try and educate my clients and take time to present an SOA because there is so much to try and file note to record proof of their understanding. But I feel that a better balance needs to be reached for the cost of advice to actually come down. You can take out a $1m mortgage with a bank and they don't even have to check that you understand how compound interest works! I feel that advisors are at the extreme opposite end of that education spectrum when it comes to trying to navigate legislation with AFCA always backing the client as their default position.
I agree with FAAA and Sarah Abood's comments The FAAA painted a worrying picture, saying it could wind the clock back five years.
“There is little detail available at this stage, but on the face of it we are deeply concerned at the direction of these announcements,” said Sarah Abood, chief executive of the FAAA.
Abood believes the reforms appear to invalidate the hard work and pain involved in forming the advice profession and winning consumers’ trust.
How can we be taken seriously as a profession if we continue to move the goal posts and undo all the hard work to get to this point. As a CFP and CPA I have undertaken a significant amount of study to be qualified to provide appropriate advice and feel these changes make a mockery of all the study and hard work I have endured!
We need to lift the status of our profession and feel the proposed changes do not do that!
Extremely disappointed with Jones and hope our professional bodies continue to fight for a highly regarded profession.
RIP Self Employed Adviser
Sarah Abood is spot on. There will be no difference between "qualified advisers" and "professional advisers in consumers' minds. All the mental health issues and some suicides that affected some planners who were probably more than qualified to provide advice is to no avail. They should be called "product consultants".
I can already see the ad campaigns from the institutions. Why pay for a financial adviser when you can use one of our qualified financial advisers for free. I'm at a loss to see how this process ever got this far. Is this not what discussions with the FAAA, etc are supposed to nut out before thing ever get this far? I cannot even point a political finger because they're all in on this. Watch for the eventual nationalisation of the retirement pool. It's too tempting for any government to leave this pile of money alone.
My first reaction on reading Stephone Jones' announcement was that the name for the bank and super fund advisers will be misleading for consumers. Doesn't anyone in the government think these things through? The FAAA is right to fight against it.
I can't agree more. It should be much clearer for consumers... how about "Partly Qualified Advisers". This would at least give a clearer picture and instil the correct message that should be given: "Free" does not necessarily equal "Good"!!
The removal of the Safe Harbour steps and streamlining of SOA's is just a necessary step to enable the government to legislate to allow for the introduction of Sales People (called Qualified Advisers) into the Industry Funds and back into Banks and Insurance companies to sell products to uninformed Australians.
Tell me how having sales people called Qualified Advisers doesn't water down the value of a Professional Adviser who is properly qualified and experienced and tell me how this will not confuses Australians seeking sound retirment and protection advice? Those Australians getting advice from "Jones's Qualified Advisers" will not know the difference (on face value) between highly qualified Professional advisers until its too late!
This is a joke... FCS / Industry Funds ask... And they get!!! There is zero care by the Minister Jones and his Government on how this will impact both the Advice Industry, Professional Advisors and how it will impact Australians financial advice outcomes....
introduce sales people (to be called qualifed Advisers) int
I agree with the FAAA that "qualified" adviser is misleading and is a slap in the face to all advisers that have had to go back to University to increase their "qualifications" to the higher degree level. Let's call bank and super funds employees what they truely are Bank and Super Fund "Sales Consultants" or "Investment Consultant" or "Super Consultant". Please do not use the term "adviser" unless they are truely qualified and part of the profession!!
I'm a career Financial Adviser of over 30 years. I have put up with an insane amount of tinkering with my profession over the years, designed to remove the crooks, stop the sales practices, save people from their own stupidity, and to build trust in what our profession does. I've taken myself back to school at vast cost to meet the new education standards, paid higher and higher PI premiums and regulator fees to compensate the public for wrong doings that were not of my making. The decision announced to allow banks and financial product manufacturers to provide financial advice, when what they do is sell products, is the icing on the cake. This is what happens when we don't study history. Strap yourselves in, we have some turbulence ahead.
"Qualified" is code for a Vertically Integrated Fund Sales Rep, paid for by the fund members without their consent. The Big Bank/Industry Super Funds have now become today's Tied Agency AMP/National Mutual of the past. And this will be really bad for consumers, as it was back then.
So under the Labor Govt's announced proposal today, we now have the Big Banks & the vertically integrated Big Industry Super Funds salivating at the prospect of being able to charge you an ongoing (intrafund) advice fee, without your consent, and then they use the money they deducted from your account to pay for another members advice in order to provide the other member's personal advice (in many cases) unrelated to the super fund involved. If a retail adviser did this, they would be banned by ASIC. But if a Big Institution does it, it is OK. It's now time to flee to a SMSF, where at least you stay in control of your own money, rather than having your funds being clipped to pay for the personal advice of someone else. According to public record, even Commissioner Hayne and Choice (Super Consumers Association) would struggle to support these new proposals by the Labor Government.
As an adviser for over 30 years who sold their business in early 2020 it seems the current value of an advice business is zero and falling..the retailers can now wholesale product to all and sundry , shelf space fees, volume bonuses etc etc are back in spades
by virtue of receiving a salary from an insto offering a product, these so called "qualified advisers" are conflicted by advising client's to remain invested in the product offered by the same company who pays their salary - I'm appalled by this development and I can't un-see the political nature of this decision with Labor lining the pockets of their Union-owned Super funds (putting members first they say....?!?!)
Consumers will always choose the better-qualified adviser where they can afford it. Financial Advisers are equipped to also provide Simple Advice. They don't have to wait to get their processes in place. All they need is for the government to legislate for the use of the simpler Advice Record. Fintechs have already created software that enables simple advice to be delivered to future full-service clients at a fee they can afford and still allow the financial adviser to receive adequate renumeration for their work.
It is a shame that they decided to muddy the water with what overall is a refreshing approach to the advice process. The term "Qualified" diminishes the recognised term " Financial Adviser" and this type of product provider should be called what they are. "Product Adviser". it is about time we created a distinction between the "Industry" and "Profession". The "Industry" is the products etc. and the "Profession" is the advice.
This is all so ridiculous.
I have 33 years experience, and have studied hard over the last 4 years to obtain the government's required degree, to allow me to continue to provide professional quality personal advice to clients here in Australia for the last 17 years. Then the new government removes the degree requirements, I studied so hard for, and now they plan to allow people with much lower qualifications ( yet to be detailed) working for super funds and paid by the fund, to provide "advice" , and have the title of "qualified adviser".
In my 33 years, I don't believe the majority of my clients have ever asked about my qualifications. So to many, "Qualified Adviser" is the same as "Financial Adviser ".
This all in my view, totally undermines all the government intended to do in the first place.
Then there is the issue of doing a back flip on the degree requirements, and the fact that on the FAR there cannot be any difference between those that did the degree in late life, and those that could not be bothered and hoped past experience would be sufficient.
Coming from the UK and watching what happened there. This is a disaster waiting to happen.
Most advisers are now degree-qualified with many years of actual practical industry experience, and are fully-qualified in terms of having paid for, sat and passed the Financial Advisers Exam. In order to avoid any confusion, this new breed of "adviser" could be called: "restricted product adviser" or "restricted product representative" - ie. restricted to providing advice only on the products they are trying to sell to the retail customer and nothing more instead of the confusing word "qualified". In other words, no wills, estate planning or power of attorney advice, as they have no legal qualifications to do this kind of work, no income tax or capital gains tax advice as they are not registered tax agents, and definitely no "sticky-beaking" into how much money a customer might have sitting in their bank account when the customer is doing an over-the-counter bank transaction and suggesting that they see one of the bank's "qualified advisers" as to how best they might maximise their returns - the latter exactly what many bank tellers did pre the Royal Commission into banking and financial services. Perhaps the banks may now start to reopen some of their branches and once again prey on the vulnerable. I have lost count as to the number of clients that used to come into see me to claim a tax deduction for initial advice fees for going into an investment product as their adviser had suggested to them when the adviser should have known better that no deduction was available: "our fee may be tax deductible but best to confirm with your accountant".
So explain to me the numbers as a “professionally qualified” adviser I don’t understand.
We have “qualified advisers” aka backpacker sales people, providing advice but not charging a fee or receiving a commission.
How does the salary get paid? (Not to mention bonus, promotion for hoovering money into your employers account).
The only logical place is other members of the fund by fund overhead.
How is this not FEE FOR NO SERVICE!!
The FSC has never had client outcomes as a priority, it’s all about insto domination.
To get from Hayne to here in just a couple of years is grubby slimy politics at its best.
I’m disgusted by this rubbish.
In life there will always be change.
If you have built a good business, professional reputation and act in the clients best interests then you will continue to have no problem in this new world.
Perhaps it will actually encourage people who would never seek advice to engage with someone, which isnt necessarily a bad thing.
I'm thinking this got to be a twilight zone episode where we end up back where we started many years ago...I'm a CFP with an MBA and 30+ years experience but may be competing with "Qualified Advisers" working for product manufacturers for free?
...and in the very next article, we see that ASIC is still catching up on a 2015 breach of continuous disclosure obligations from (surprise, surprise) a bank: https://www.moneymanagement.com.au/news/policy-regulation/anz-penalised-landmark-continuous-disclosure-regime-verdict?
Rather than qualified advice is should be called no fee advice or free advice, with mandatory disclosure that they are not fully qualified advisers and are not allowed to charge a fee with a legislated requirement to offer them the chance to see a financial adviser who is qualified