The bill, which was seconded by shadow financial services minister Luke Howarth, was introduced on 4 November and is titled Corporations Amendment (Streamlining Advice Process) Bill 2024.
It calls for the creation of a “clear and concise” letter of engagement to be provided prior to advice being given and a record of advice (ROA), replacing the current statement of advice (SOA).
This would help to streamline the engagement process between the financial adviser and their client, ensure a clear agreement is in place prior to advice being given and reduce administrative burden.
A letter of engagement would state the scope of advice sought and agreed to, while the ROA would outline why the advice is “directly relevant” to the agreed scope of the advice sought and the client’s personal circumstances. Providing entities will need to outline why the advice is being provided and how it is relevant to the scope of advice being sought and agreed to.
ROAs are currently already in use for small investment advice.
“SOAs are burdensome, repetitive and rarely read by clients, with their complexity leading to significant additional administrative work for financial advisers, leading to increased costs of advice for clients,” he wrote in the explanatory memorandum.
“This bill proposes to replace SOAs with ROAs solely, meaning advice documents are streamlined and easier to digest for clients, while reducing the administrative burden on businesses and costs to clients.”
The phrasing of “directly relevant” advice goes beyond the “good advice duty” proposed by Michelle Levy in the Quality of Advice Review, Van Manen said, by outlining a clear definition of advice that is tailored to the agreed scope.
“The Quality of Advice Review’s, ‘Recommendation 9 – Statement of Advice’, outlines that ‘clients should be asked whether they would like written advice before or at the time the advice is provided’. However, it is my view that this is not a sufficiently robust process. Therefore I have recommended in this bill that all advice being provided and confirmed in writing so all parties are in complete agreement and understanding of the scope of advice being provided.”
The scrapping of SOAs has already been raised in the Delivering Better Financial Outcomes legislation but given this is yet to be passed, Van Manen is hopeful this additional bill could enact the change sooner.
Minister for Financial Services, Stephen Jones, is hopeful of passing DBFO by May, but the second tranche of reforms are still in the draft stage.
