Quality of advice terms confirmed, appoints Levy as Chair
Year after year of growing compliance requirements placed on the financial advice sector likely came to a crescendo with the Financial Services Royal Commission. The introduction of FASEA, additional education requirements and Code of Ethics whilst on their own were a positive step towards professionalisation. However, they added another burden to an industry that most agree is now ‘tying itself in knots’ as they navigate multiple sources of complex legislation, tests and expectations.
There is hope that some of this burden and overlap may be removed as part of the Quality of Advice review set to commence early in 2022. The sector is incredibly broad, spanning comprehensive financial advisers, traditional planners, wealth managers, insurance advisers and stockbrokers, with very differentiated value propositions and business challenges.
The Review is focused on making life easier for all of these groups and ultimately to ‘ensure Australians have access to high quality, affordable financial advice’. Amongst other areas the Review will consider:
- whether there are opportunities to streamline and simplify regulatory compliance to reduce costs and duplication;
- how to improve the clarity and availability of documents provided to consumers; and
- whether parts of the regulatory framework have created unintended consequences.
Among the key areas to be considered include are the definition of ‘financial product advice’, ‘general advice’ and ‘personal advice’ with hope that product and strategy advice could be separated. Central to their review is the experience of customers and their understanding of the sector. The Review will also consider the complex sector of ‘scaled’ and ‘intra-fund’ advice that will be central to the future direction of the industry fund sector.
It will also consider the future of the ‘safe harbour’ checklist included as part of the best interest duty, asking the question of whether it should be repealed as Commissioner Hayne suggested. Solutions to unruly Statements of Advice and the plethora of advice documents and disclosure requirements will be reviewed. This will extend into fee disclosure and consent requirements with many practitioners highlighting the inconsistency across platforms and other providers.
The life insurance forms will also be included, but in a positive move for the HNW sector, changes to the definition of ‘retail’ and ‘wholesale’ clients have been specifically excluded. The FASEA and Treasury Professional Standards will not be considered, nor will financial redress arrangements like AFCA or the Compensation Scheme of Last Resort.
Chairing the review will be Michelle Levy, a partner of Allens and experienced legal mind with a specialisation in financial services. Her appointment was welcomed by the SMSF Association with CEO John Maroney saying “A specialist in superannuation, life insurance, distribution and financial services law, Levy will bring the necessary expertise and experience to this critical issue of over-regulation that is confronting the financial advice industry.”
“Aside from her legal work, her roles as a member and former chair of the Law Council of Australia’s Superannuation Committee and a member of the ATO’s Superannuation Industry Stewardship Group make her ideally suited to this position.”
Maroney also said that after years of continual regulatory change, the advice framework is complex, convoluted and costly, so this review is both important and timely.