Abood ‘pleased’ with Jones’ QAR response, including quick wins

Speaking to ifa on Tuesday, CEO of the Financial Advice Association Australia (FAAA), Sarah Abood, said Financial Services Minister Stephen Jones delivered a strong response to the Quality of Advice Review (QAR).

“When you look at the way that the response is structured, what they are referring to as the stream one recommendations are very much the quick wins that we have been asking for and we think it’s a very sensible response,” Ms Abood told ifa.

“We think it will have an impact for advisers and has the potential to lower the cost of advice, and that’s really pleasing.”

On Tuesday morning, 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.

Among those quick wins, or stage one recommendations, is the removal of fee disclosure statements, as well as crucial changes to the current statements of sdvice (SOAs), which will see them replaced with “fit-for-purpose” advice records.

Ms Abood also applauded the minister’s intentions to consult further on other recommendations.

“There are other recommendations in there that are bigger in terms of how the advice profession is structured, but we have said that we think we need some time and some discussion on those and that’s been heard,” she said.

Those “bigger” recommendations include the circumstances surrounding the expanded role superannuation funds are due to play in the industry.

Namely, the minister said that under stream two, super funds will expand their provision of advice, but noted 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.

“The minister in his speech did specifically acknowledge that there were questions around, for example, what the minimum education requirements would be for people who are non-relevant providers and so on. So, we are looking forward to getting stuck into it in the next phase, with the minister’s office and Treasury,” Ms Abood said.

“I think we do need to have some more discussion around how we can make sure that advice is safeguarded for consumers, so that’s a good thing. We’re keen to get on with it to make sure that we can get those issues resolved as soon as possible,” she added.

According to Ms Abood, the FAAA will ask the minister how he intends to broaden the scope of the advice provided by funds.

“For example, will the sole purpose test be expanded to cover financial advice?" she said.

“One way you could do it, potentially, is to just define financial advice as something that can be charged to a super fund, because at the moment the fact that that advice is limited to the member’s interest in the fund is really what would get in the way to full transition to retirement style advice.”

Recommendation 6 of the QAR, penned by Michelle Levy, endorses super funds and their ability to provide advice.

Namely, Ms Levy wrote: “Superannuation fund trustees should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement.”

Moreover, she said that trustees should have the power to decide how to charge members for personal advice, and that restrictions on collective charging of fees should be removed.

However, Ms Levy proposed that advice offered by super funds be subject to the good advice duty. Namely, recommendation 4 of the QAR says that a person who provides personal advice to a retail client must provide the client with advice that is fit for purpose and is in all circumstances “good”.

But, on Tuesday, Mr Jones clarified that he will be subjecting the good advice duty to more consultation alongside the expansion of the definition of personal advice.

“Government consultation will test how these proposals might operate under different advice models, including digital advice models, and across sectors. Consultation will also consider practical policy design and implementation issues, including in relation to consumer protections,” he said.