Treasury has released the Quality of Advice Review – Proposals Paper for consultation.
The proposals in this paper are intended to make it easier for consumers to access financial advice that meets their needs from a range of different providers and for advisers and financial institutions to have more helpful conversations with their customers.
The Reviewer has concluded that substantial changes should be made to the regulatory
framework applying to financial advice to improve the accessibility and affordability of financial advice.
The principles outlined in the paper have not received Government approval.
The paper does not include any proposals for life insurance and general insurance commissions nor other forms of benefits.
Based on the proposition that good and timely financial advice can improve outcomes for consumers, the proposals include:
- The financial services regime should regulate the provision of ‘personal advice’. ‘Personal advice’ is a recommendation or opinion provided to a client about a financial product (or class of financial product) and, at the time the advice is provided, the provider has or holds information about the client’s objectives, needs or any aspect of the client’s financial situation.
- The regime should no longer regulate ‘general advice’ as a financial service and the definition should be removed together with the obligation to give a general advice warning. What is currently general advice (but would not be covered under the proposed definition of personal advice) should continue to be subject to general consumer protections. This proposal would reduce regulatory complexity.
- A person who provides personal advice should be required to provide ‘good advice’. ‘Good advice’ is advice that would be reasonably likely to benefit the client, having regard to the information that is available to the provider at the time the advice is provided.
- The obligation to provide good advice would apply whether the advice is provided by an individual, an algorithm or a digital advice service. It would also apply whether the advice is provided by an employee of a bank, insurer or superannuation fund or a professional financial adviser.
- Fee disclosure statements should not be required. Providers of personal advice should obtain annual written consent from their client to deduct advice fees from a financial product if there is an ongoing fee arrangement. The consent form should explain the services that will be provided and the fee the adviser proposes to charge over the course of the following 12 months. Where advice fees are deducted from more than one product, a single consent form should cover each of the products issued by a product issuer.
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Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
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