Advisers are split about whether they support the final Quality of Advice (QoA) Review recommendations, with a slight majority backing reviewer Michelle Levy’s remedial blueprint.
This month, Treasury made public the full 267-page report, which includes 22 recommendations for ways in which the current regulatory framework could be changed. It followed consultation with more than 3000 advisers.
Last week, we wrote several of the suggested reforms could be implemented fairly quickly, as Ms Levy pointed out herself, including adapting ongoing fee arrangements, replacing Statements of Advice with requestable written records, and changes to Financial Services Guides rules. Other changes – such as the amendment of legal definitions – would take longer.
We’ve surveyed advisers about their own views on the recommendations and found around three-in-five were in favour of the proposed roadmap and two-in-five against it.
The next steps
Treasury will now consult on the report’s recommendations, with Assistant Treasurer and Minister for Financial Services Stephen Jones encouraging feedback on the proposals.
“Anyone with an interest in financial advice should read it and make their views known,” he said. “We want to see an industry with strong professional standards that’s accessible for more Australians and look forward to hearing views on achieving that goal.”
Figure 1 – Advisers’ views of the review recommendations
Source: Adviser Ratings
Concerns about stubborn costs, losing SoAs
Already, some advisers have expressed doubts to us about whether tweaking regulation again would achieve the desired results.
One adviser said he’s concerned about further changes to an already depleted landscape.
“We are finally seeing numbers start to rise in the profession. We need to stop with the changes and review after review. Let’s get on with it and allow the industry to recover and recoup,” he said.
Another queried whether the proposed changes would result in material cost reductions.
“I see nothing here that will greatly reduce the cost of advice, apart from the slight reduction in managing the ongoing fee arrangements,” he said.
Another agreed: “Sadly I can't see costs being greatly reduced without an influx of new advisers.”
The same adviser mentioned concern about dropping SoAs, saying they have a role in protecting advisers.
“SoAs, with all their faults, provide a framework,” he said. “Going freestyle requires a level of trust in regulators that it is hard to see returning.”
Last year, we asked advisers about the proposal to retire the SoA and replace it with a record of advice that could be produced upon request. A majority supported that proposal.
One adviser previously told us “SOAs have been irrelevant for a decade now”.
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Comments8
"One of my clients told me in very succinct terms what getting financial planning advice was all about - "Why buy a guard dog and bark yourself". The analogy about going to see a doctor in an earlier comment is a good one; I would add in about going to see a lawyer. You get their advice, and not a mountain of paperwork describing legal precedents. The SOA needs to be retained, but in an "advice summary" and fee disclosure format. Clients have no interest in reading the general information as, in their eyes, it's all just "Finglish" and jargon. A brief SOA, with a flowchart and/or timeline should be sufficient. Advisers should be able to, and confident in justifying their advice to their licensee during an audit, and AFCA if it ever ends up going that far. We supposed to be professionals, then why is it we're not allowed to make a professional judgement without the regulator in the background excessively admonishing us for every slight error in paperwork we make. The litmus test is - Have I acted in the client's best interest and are they now in a better position after the advice I've provided them with?"
Mark Tyminski 13:35 on 23 Feb 23
"Having been in the industry since 1977 I have seen more reviews than I care to remember and here we are in 2023 with another review. The real planners in this Profession know the difference between right and wrong and these reviews always seem to try and fix the wrongs but don't recognise the rights!! Take the Royal Commission for example - it was aimed at Licencees not at planners yet we are the ones paying the price. The question should not be whether there are or are not SOA's but what should be contained in them. They don't need to be 40 pages and could be 8 pages which many clients would appreciate. Complete loss of SOA will see us back to another Royal Commission within this decade. A proper SOA should read like a book. Why did the client come to see you? What is their current position? What can advice do to enhance their position and why they are better off having come to see you? Add in fee disclosure and relevant links to documents by inference and there is your SOA wrapped up in 8 pages and everyone will benefit. Think of the last time you went to a doctor with an ailment. What process did he/she follow to prescribe you a solution to your problem? Bet it was not a 40 page explanation but merely a prescription backed by file notes. Why can't we get to this level of trust, advice and professionalism? On a positive the retirement of FDS is very positive as long as there is annual consent why do we have to draw this out with repetition. "
Peter Donovan 12:24 on 23 Feb 23
"The QAR may make changes to the requirements but the licensees may still require SOAs and ROAs. Most clients would like a document that they can refer to later but it needs to be uniform, simple to read and respond to client needs. Advisers can produce something to meet client needs which will also protect advisers. Some guidelines are required to be effective."
Gail Gadd 11:35 on 23 Feb 23
"I am a stockbroker who has advised clients with SMSFs for more than 20 years. The QAR makes scant reference to the SMSF sector, and the government will likely most listen to the Industry Funds. QAR maintains "one size fits all" for Fin Planners and Stockbrokers. I see a key issue is lack of engagement of many Australians in financial matters / financial literacy. QAR gets a thumbs down from me"
BeenThereB4 11:00 on 23 Feb 23
"Many Australians that I encounter on a daily basis have the same basic issues. Money is one of the real things that causes stress to individuals, couples, families, etc. etc. Our level of financial literacy in this country is abysmal and in making decisions approaching retirement many Australians really need help. When the next “crisis” hits and this may be with valuations on unlisted and private assets held by Super Funds if they are forced by APRA or market forces to provide real in depth valuations – where are people going to go to get some advice, comfort & solace – it’s from real people, not call centres or digital apps or Algo’s. Offering a “2 tier approach” to financial planning is not acting in the best interest or providing “good advice”. All lawyers, medical professionals, builders, etc. must meet high standards to provide their services – why should financial planning standards be watered down just to suit the institutions and their commercial needs. What level of training and support are these so called “non-relevant providers” going to receive. What about professional indemnity insurance, the new compensation scheme of last resort, payment of ASIC levy, a viable code of ethics, etc. etc. The arguments being waged in the public arena on this matter are being dominated by the large institutionally owned operators who want to get back into their vertical integration operations. Michelle Levy came into this process with her own bias and she is either naive or a potential stooge if her recommendations are accepted in full as they will allow the “Foxes Back into the Hen House”. The Safe Harbour in itself is not a “box ticking” exercise (although large institutionally owned enterprises have tried using this as their defence – to wit Dixons who used to regularly grace the front pages of the AFR), but part of a process to ensure that an adviser has considered all issues which may impact on the client. Even if the Safe Harbour was abolished a Financial Planner must still meet virtually the exact requirements under our 12 part Code Of Ethics requirements. A Statement Of Advice (SOA) is not just “a document that is heavily weighted to an adviser’s legal obligations and provides little benefit to many recipients of advice”. The SOA sets out the advice, recommendations, reasoning. Cashflow/Tax/Centrelink obligations, as well as considering alternate strategies, risks and costs of the advice & demonstrates how the client has been put into a better overall position. Good advisers provide also an executive summary of the advice & benefits and walk the client through the advice to ensure that they understand it and so they can obtain “informed consent”. Whilst SOA’s can be streamlined, many of the current requirements are due to stupid laws or being enforced or interpreted by ASIC & their staff (who have had their own merry go round for years & historically have acted in what some might say is a pedantic manner). It is only in the last 18 months that ASIC have given a public ruling (after being Pushed for almost 15 years) that an adviser when shifting from 1 licencee to another does not need to provide a new SOA, but can rely on the existing one to provide ongoing advice. Advice will still need to be provide advice in some written form, not only so that there is a record that can be referred to, but also with notes of meetings, calls with clients can substantiate informed consent. Lastly PI Insurers will demand this in any case – because with PI cover we can’t operate as an industry. "
2020fp 17:46 on 22 Feb 23
"The main question should be what is the desired outcome? Putting the priority as better client end positioning, access to more affordable advice and in the case of Life / Disability Insurance product coverage, more affordable premiums, is what the Government wanted and instead, we got the exact opposite. The next question. Considering there is a need for a minimum 20,000 risk specialists to cater for the needs of Australians, have the proposed changes been sufficient to reverse the spiralling downward trajectory of Adviser numbers and provided sufficient impetus for new people to want to start a career as a risk adviser? The answer is NO. The solution is to separate risk advice from Investment advice and have these two totally different Advice Business models placed into their own Education and training regime that focuses on the work and advice that is provided. The third requirement will not go down well with the "Vested Interest" brigades, as it involves common sense and real world solutions. Look at how most Advisers entered the Industry and many of the brightest and innovative leaders did not come through the education path system. They fell into it. What the utopian visionaries have done is try to kill off any opportunity for the Life Insurance sector to get a kickstart and rebuild, by making it too hard to start in the Industry. The most efficient way to get young advisers and bring back exited experienced advisers, is to let them enter or re-enter as Advisers specialising in risk advice, then while learning and building up their communication skills and experience, if they wish to continue on as Financial Planners, they can study as they work. Michelle Levy started the conversation and she should be recommended for that. However, there is much more needed to bring about the stated goals of more accessible and affordable advice."
Jeremy Wright 16:23 on 22 Feb 23
"I agree with Ray. SOA's are about as effective as AFSL's. Stopping the requirement to have to be a AFSL AR would help reduce costs immensely. Keep all Education levels etc etc but drop the 20% AFSL tax on our earnings.. "
David 16:05 on 22 Feb 23
""The same adviser mentioned concern about dropping SoAs, saying they have a role in protecting advisers." The focus should be on protecting consumers, not ourselves. SoAs are completely ineffective. They are not consumer friendly and expensive to produce. An SoA does not guarantee a good client outcome. A good client outcome doesn't need an SoA"
Ray 14:41 on 22 Feb 23