What does QOA say about five key advice issues?
The final report of the Quality of Advice Review has been published today.
The release was seven weeks after being given by reviewer, Michelle Levy, to the Minister for Financial Services, Stephen Jones, on 16 December.
It had commenced on 11 March and included an issues paper and proposals paper which prompted over 100 submissions in response from industry stakeholders.
1. Statements of Advice
The requirement to provide a Statement of Advice (or record of advice) should be replaced with the requirement for providers of personal advice to retail clients to maintain complete records of the advice provided and to provide written advice on request by the client.
Clients should be asked whether they would like written advice before or at the time the advice is provided and a request for written advice is required to be made before, or at the time the advice is provided.
This requirement will not apply to a person who is currently exempt from the requirement to provide SOA (e.g. a person who provides personal advice about general insurance products). ASIC should provide guidance on how advice providers may comply with their record-keeping obligations.
2. Superannuation advice
Super fund trustees should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement.
In doing so, trustees will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice. Super fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.
Super trustees should be able to pay a fee from a member’s superannuation account to an adviser for personal advice provided to the member about the member’s interest in the fund on the direction of the member.
3. Digital advice
Levy said there was “no need for regulation specific to digital advice” as the existing recommendations in the report would make it easier to provide digital advice.
“I am satisfied that the recommendations in this Report will assist existing providers – financial institutions and financial advisers – to provide more digital advice tools to their customers and clients. In many cases they will do so at no additional cost. I am also satisfied that they will help existing and new providers of digital advice tools to offer new digital advice services to consumers. To quote the Terms of Reference, they promise to ‘enable mass market adoption of low cost advice.”
4. Life insurance
She recommended to retain the exception to the ban on conflicted remuneration for benefits given in connection with the issue or sale of a life risk insurance product. Commission and clawback rates should be maintained at the current levels (60% upfront commissions and 20% trailing commissions, with a two-year clawback).
A person who provides personal advice to retail clients in relation to life risk insurance products, who receives a commission in connection with the issue or sale of the life risk insurance product, must obtain the client’s informed consent before accepting a commission. This consent should be recorded in writing and should be obtained prior to the issue or sale of the life risk insurance product.
In order for the client to make an informed decision, the advice provider must disclose: • the commission the person will receive (upfront commission and trail commission) as a per cent of the premium; and • the nature of any services the adviser will provide to the client (if any) in relation to the life risk insurance product (such as claims assistance).
Consent will be one-off and apply for the duration of the policy. This requirement will only apply to life risk insurance products purchased after the commencement of this recommendation.
5. Personal advice
The definition of personal advice in the Corporations Act should be broadened so that all financial product advice will be personal advice if it is given to a client in a personal interaction or personalised communication by a provider of advice who has (or whose related body corporate has) information about the client’s financial situation or one or more of their objectives or needs.
Personal advice means financial product advice prepared or adjusted for or directed to a particular client in circumstances where: a) the client tells the provider of the advice their financial situation or one or more of their objectives or needs; or b) the licensee responsible for the advice, or a related entity of the licensee, if the licensee is a body corporate, holds information about the client’s financial situation or one or more of their objectives or needs.
AUTHOR
Laura Dew
Recommended for you
Insignia Financial has announced a board director will be stepping down next year after almost a decade amid a board refresh.
Zenith Investment Partners has appointed a Brisbane-based business development manager, who previously led Fitzpatrick Private Wealth Partners as a director and senior adviser.
Praemium has said it is open to investing in artificial intelligence “in a big way” as it believes it can transform the business and details how it is already being used by the firm.
Sequoia has shared its strategic initiatives for FY25, including organically increasing its licensee market share and restructuring its specialist investment arm.
The elephant in the room is that Industry Funds can continue charging hundreds of millions pa in ongoing Intrafund advice fees, whereas retail advisers are lumbered with ongoing fee consent forms, inefficient red tape that doesn't exist in any other nation on earth, apart from Australia.
I see your point - if I didn't know better I would assume corruption - but we all know we can't say that about ASIC and Treasury can we?