Quality of Advice Review Recommendations Could Bring Quick Relief

When we were compiling our annual Landscape Report last year, we discovered some worrying statistics.  

First, 4-in-5 Australians in their mid-40s and early-50s told us they wanted financial advice but did not have the capacity to pay for it. The figures were similar for retirees aged 75 and above.

Second, the cost of providing advice has risen so rapidly that median fees shot up 40 per cent in three years, to more than $3500. Given that’s a median, many advisers are charging more, while most plan to increase their fees this year.  

This state of affairs – and our figures – were highlighted in the Quality of Advice Review final report, which was released to the public last week.

In the report, reviewer Michelle Levy has laid out a detailed blueprint for change, which includes replacing the Statement of Advice (SoA) with good recordkeeping of the advice given and written advice upon request. It also recommends the inclusion of a “good advice” duty and statutory best-interests duty, without a safe harbour. Additionally, it suggests Australians should be able to use some of their super to pay for advice.

While the federal government still has to respond to the report, it’s clear several of the changes it puts forward could be enacted quickly to broaden Australians’ access to financial advice at a critical time.

 
Implementing the recommendations

As the report notes, the recommendations vary in their complexity, meaning some could be introduced almost immediately after legislation was passed, while others would need a bit more time.

Among the recommendations that affect how advisers run their businesses, several wouldn’t take long to implement, Ms Levy points out. These may include:

-Changes to ongoing fee arrangements
-Replacing SoAs with written records (available upon request)
-Swapping Financial Service Guides for information about payment and dispute resolution on the practice website.

“These recommendations also promise some benefits to consumers, in the form of more consumer-focused documents, fewer forms and lower advice fees, and so I anticipate the early enactment of legislation to make these changes would be welcomed by financial advisers and their clients,” Ms Levy wrote in the final report.

She also suggested the proposed consent requirements for insurance products could begin shortly after legislation went through.

As for the ones Ms Levy said would take longer, they mainly related to legal definitions: what makes up personal advice, who can give personal advice, and defining statutory best-interests duty and good advice duty.

The bottom line: tangible changes that would affect how long it takes to produce advice – and how much advisers need to charge – could be made in a very short period of time.

With thousands of adviser exits and a cost-of-living crisis, we say the sooner the better.

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