‘Definite possibility’ of no government action on QAR

On an upcoming episode of Relative Return, the new podcast by Momentum Media, Mayflower Consulting chief executive officer Sarah Penn was asked if she thought the government could take no action at all on the Quality of Advice Review (QAR).

“At the moment, that is a definite possibility, I’m sorry to say, just because there is so much going on,” Ms Penn said. “The government is trying to boil the ocean in terms of all of the changes they are making to everything in financial services. 

“There is a lot of good intent, but how it will all play out is questionable,” she said.

Ms Penn, who works alongside financial advice groups, fund managers, and super funds as a consultant, suspects that Michelle Levy’s recommendation to scrap Statements of Advice (SoAs) was a major curveball for the government.

“When the government commissioned the review, they had no idea that Michelle Levy was going to come out at the end of it and say you should get rid of Statements of Advice,” she said.

“I think what has happened — and this is absolute conjecture — is that the government read the report, saw that it said get rid of SoAs, and they didn’t even know where to start with it.”

Ms Penn believes SoAs should be scrapped, saying they add no value to the quality of financial advice.

“It is the right time to get rid of the SoA. But whether the government will be able to do it or if it just gets replaced by another piece of paper remains to be seen,” she said.

A core part of Ms Penn’s business is working with clients to produce Product Disclose Statements (PDSs), which she says are only ready by consumers when they are upset, stressed or grieving.

She has seen the PDS evolve from seven-page “Key Feature Statements” in the early 2000s to long, legalistic documents to their current format, which is closer to the early 2000s example. 

The former Macquarie director believes SoAs will have a similar fate of undergoing a series of changes before arriving back in their original state.

Meanwhile, BT Financial CEO Matt Rady told ifa, removing SoAs will relieve a significant burden on advisers.

“Ultimately, if adopted, the recommendations should make advice more affordable, largely from the reduced burden that accompanies the production of an SoA,” Mr Rady said.

“Not only are we talking about reduced cost, but reduced time to serve, which means more ability to serve more clients. This increase in ‘supply’ of financial advice services can also help to reduce costs overall.”

BT head of financial literacy and advocacy Bryan Ashenden told ifa that in their current format, SoAs are lengthy and legalistic.

“In its current form, it doesn’t meet the Corporations Act requirements of being clear, concise, and effective,” Mr Ashenden said.

“Notably, the report’s recommendation requires an adviser to ask their client if they want something documented, and provide it if they do. We believe the requirement to provide something will be part of any legislated change here. But the key will be ‘what’ it contains and ‘how’ it looks.”

Mr Ashenden said one of the key benefits of removing the SoA requirement is that it will allow for greater flexibility and innovation in the way advice is delivered.

This includes different forms of communication, such as PowerPoint presentations, videos, or animated presentations, which help to make financial advice more engaging and accessible to a wider range of clients.