Industry reacts to Quality of Advice review

The Government has been accused of ‘cherry-picking’ issues for the Quality of Advice Review as it reacts to the publication of its terms of reference.

Financial services and superannuation regulation lawyer, Michelle Levy, had been appointed as reviewer and would assess how the regulatory framework could deliver better outcomes for customers.

This included whether there were opportunities to streamline and simplify regulatory compliance to reduce costs and duplication, how to improve the availability and clarity of documents provided to consumers and whether parts of the regulatory framework had created unintended consequences.

However, there were several proposed ideas which were excluded including income and asset thresholds for wholesale investors and financial services redress arrangements.

Jane Rennie, general manager for external affairs at CPA Australia, said: “We’d hoped the Terms of Reference would include some of the long-standing issues in the sector, such as the wholesale client and sophisticated investor thresholds. Unfortunately, these have been specifically excluded, to the potential detriment of these consumers.

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“The Terms of Reference cherry pick some issues while skating over others. We’ve tried this approach with financial advice before. They say the definition of insanity is doing the same thing over and over and expecting a different result. That feels a lot like what’s happening with this review.”

But Financial Planning Association of Australia (FPA) chief executive, Sarah Abood, said the review closely aligned with the FPA’s suggestions and welcomed the opportunity for financial advisers to present their views.

“The final terms of reference are sensible and closely align to the FPA’s vision for the review.  In particular, this includes how the regulatory framework could better enable high quality, accessible and affordable financial advice for consumers and remove unnecessary complexity. 

“It is critical to have the view of all stakeholders in the profession included in the review, in particular financial planners and their clients who can provide real world, practical examples of how the current regulatory environment and requirements adversely impact the client experience.”

John Maroney, chief executive of the SMSF Association, said: "Affordability and access to advice is a significant issue so it presents an opportunity to investigate how the regulatory framework can deliver better outcomes for consumers by simplifying and reducing the cost of regulatory compliance".

Blake Briggs, acting chief executive at the Financial Services Council (FSC), said: "Michelle has been an active supporter of the advice industry, such as leading work on a range of wealth management issues across superannuation, life insurance and advice to lower compliance and operational costs for advisers.  

“Layers of complex regulation have driven the average cost of providing advice to more than $5,000, putting it out of reach for many consumers. The Quality of Advice Review is an opportunity to make advice affordable and accessible.

“The design of the Life Insurance Framework will be an important part of this Review, as will the challenges of underinsurance and supporting access to affordable advice.”  

The public were invited to make submissions and a report would be provided to the Government by 16 December, 2022.