Jones' QAR response explained, 14 of 22 recommendations accepted

Behind closed doors on Tuesday morning, Financial Services Minister Stephen Jones unveiled the government’s anticipated response to the Quality of Advice Review (QAR).

Speaking to a small audience of superannuation fund CEOs and senior industry executives, Mr Jones revealed the government will accept 14 of the 22 recommendations made by QAR lead Michelle Levy.

“There are also some problems that have a ready-made answer. Others are tougher nuts to crack,” Mr Jones told an ASFA breakfast.

“And so, I think we can move quickly on the former, while working together to solve the latter.

“With this in mind, I am pleased to announce that the government will adopt the bulk of the review’s recommendations immediately, with legislation to come in the second half of 2023 and early 2024.”

The government’s legislative response to the QAR will be divided into three streams, according to the minister’s speech seen by ifa.

Under stream one, Mr Jones said the government intends to scrap fee disclosure statements, while replacing statements of advice (SOAs) with “fit-for-purpose” advice records.

Also under this initial stream, the government will eliminate the safe harbour steps from the best interests duty, consolidate the ongoing fee renewal and consent requirements into a single form, and introduce standardised consumer consent requirements to classify a consumer as a wholesale or sophisticated client.

Moreover, the government will simplify certain exemptions to the ban on conflicted remuneration, while removing others, and introduce standardised consumer consent requirements for life, general, and consumer credit insurance commissions.

“The first stream of work will streamline the process of giving advice through current channels,” Mr Jones said.

Citing “weaknesses in the current regulatory framework”, the minister said, “with each superfluous rule, the cost of providing advice has increased”.

Stream two of the reforms — dubbed the “expanding access to retirement income advice” stream — will see superannuation funds expand their provision of advice, with Mr Jones vowing to remove restrictions on collective charging of members for advice.

Moreover, superannuation trustees will be provided with legal clarity around current practices for the payment of adviser service fees.

Expounding on the government’s thought process, Mr Jones said funds “must play” an expanded and more effective role that serves the needs of their members.

“In fact, government has already told them they need to do more,” the minister said.

Mr Jones stressed that super funds are “well-suited to safely meeting the needs of their members”.

“They are already governed by strong obligations to act in the best financial interests of members and act for the sole purpose of providing retirement benefits to members.”

The minister, however, clarified that further consultation may be necessary to address questions regarding the scope of advice that can be provided by a fund, the education standards needed for an employee or representative of that fund, as well as how funds are held to an appropriate duty.

“We are open to tailoring that model as necessary based on feedback from industry and Treasury’s advice to make sure it leads to meaningful outcomes for members," the minister said.

“In the coming weeks, Treasury will work with industry to finalise the details for how these recommendations can be effectively implemented.”

‘Good advice’ placed on ice

The remaining eight recommendations, Mr Jones confirmed, will be placed under further scrutiny, including recommendation one that proposes a broader definition of personal advice, the introduction of a good advice duty (recommendation 4) and the removal of the obligation to give a general advice warning (recommendation 2).

The final stream will also examine the role of other institutions — banks and insurers — in providing more information and advice.

Mr Jones conceded that he is “just not compelled” that the same urgency exists in these “other” spaces.

“There is also a difference between the obligations that cover these institutions and superannuation funds,” he said regarding the return of banks to advice.

“And so, I’m not compelled that the model that has been proposed in the review is fit-for-purpose for these other sectors as is, even where there is a need.”

Noting that the review has “given us some principles to guide the conversation”, Mr Jones stressed that “right now, more is needed to get it to the point that it can make a meaningful difference”.

The minister added, however, that the government is “not ruling out any recommendations” and “will finalise our position on the remaining recommendations before the end of the year”.

The government is also due to consult on the design of the replacement for SOAs.

ifa last week revealed that a small audience of superannuation fund CEOs and senior industry executives would be the first to hear the government’s response to the QAR at an exclusive event organised by the peak body for the super industry ASFA.

The government’s response to the QAR has been highly anticipated by the 16,000 financial advisers operating in the industry.