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Super funds, banks to offer ‘new class’ of financial advice under proposed reforms
Financial advice could become more accessible to millions of Australians, following the government’s release of a comprehensive reform package aimed at expanding the pool of advisers by bringing banks, superannuation funds and other institutions into the fold.
Assistant Treasurer Stephen Jones last Thursday unveiled the Labor government’s long-awaited final response to the Quality of Advice Review (QAR), adopting most of the recommendations made by Allens partner Michelle Levy, who headed up the review.
To fill Australia’s growing advice gap, the plan calls for a “new class of advisers” to provide advice on simple matters. These “qualified advisers” – who will generally be employees of licensed financial institutions – will be required to meet certain education standards and will not be permitted to charge fees or commissions. The changes will apply to all financial institutions, including superannuation funds and banks, which will be wholly responsible for the advice provided.
“The government promised to make financial advice easier to access when Australians need it, and today’s announcement delivers on that commitment,” Assistant Treasurer Stephen Jones said December 7 in unveiling the reforms. “Access to good advice can be key to helping Australians manage cost-of-living pressures.”
Jones noted that with just 16,000 professional advisers in Australia, where more than 5 million people at or approaching retirement, many will not be able to access affordable financial advice.
“This vacuum has been filled by ‘fin-fluencers’ on TikTok, Reddit and other social media platforms,” he said, “at best, exposing customers to unregulated advice, and at worse, to scammers.” Jones noted that more than 60 per cent of all scam losses this year have been from investment scams.
The government’s plan will reduce red tape and thereby make professional advice less costly, according to Jones. It calls for a new model that will expand the supply of advice through simpler delivery at a high-quality and safe scale.
“Importantly, all advisers will be subject to the same standard under a modernised Best Interests Duty,” Jones said. “This will give consumers confidence in the advice they have received from the expanded, regulated advice environment.”
The intended fee arrangements for this new class of advice are unclear, however, with the minister’s direction ambiguous to this point. In the release, he stated the advisers will “be prevented from charging a fee or a commission”, yet he has made it clear the change is addressing a QAR recommendation that super 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”.
The new model also aims to modernise the Best Interests Duty to provide high-quality advice to consumers and replace statements of advice (SOAs) with a “plain English” record that provides more helpful information so consumers can make informed decisions.
Jones also cited super funds’ “unique obligations” and their need to drive member engagement, saying the new model will clarify which topics funds can charge for advice about and the circumstances they can consider. It will also allow super funds to “nudge” member engagement at key life stages.
The plan drew support from the banking industry, with the Australian Banking Association saying the “sensible” and “significant financial reform package” will give Australians access to simple advice from qualified advisers in financial institutions with “strong safeguards” in support.
“In recent years, too many Australians seeking simple financial advice have not been able to receive it in a cost-effective manner,” ABA CEO Anna Bligh (pictured, right) said. “While previous reforms were well-intentioned, the result has been that simple financial advice has been put out of reach for most Australians, millions of whom are at or approaching retirement age.”
And super funds, which have been focussed on easing millions of members’ transition from accumulation to decumulation as Australia’s population ages, applauded the move.
“This is a big win for millions of Australians who will now receive the help and guidance they need to feel more confident about their financial future, and that will allow them to have the confidence to move from savers to spenders in retirement,” said Shawn Blackmore (pictured, left), AustralianSuper’s chief retirement officer.
“Superannuation funds are the right vehicle for these reforms, as there is already very strong legislation governing fiduciary duty to ensure funds… act in the best financial interests of their members.”
Less enthusiastic for the reforms was the Self-Managed Superannuation Fund Association, which, though it acknowledged the need for broader availability of advice, said the introduction of the “qualified adviser” class was liable to misinterpretation, requiring further consideration.
SMSF Association CEO Peter Burgess also said the plan leaves accountants “out in the cold”.
“The lack of a suitable model for appropriately qualified and experienced accountants is an opportunity loss, and is not a good outcome for consumers,” he said. “It leaves a critical gap in the financial advice framework, particularly for SMSF trustees who have ongoing advice needs that do not involve product placement, portfolio management or discrete investment advice.”
The government says it will develop legislation to implement the new model in 2024.
