Coalition urges Labor to align with its steadfast commitment to adopt QAR in full

The Coalition has this week reiterated its support for the full implementation of the Quality of Advice Review (QAR), urging the government to align with this steadfast commitment.

In a statement provided to ifa, shadow treasurer Angus Taylor expressed the Coalition’s endorsement of promptly implementing aspects of the QAR that support advisers and reduce red tape. These include the quick wins that the Labor government has pledged to support under the first stream of its QAR response, such as the introduction of a “fit-for-purpose document” to replace the current extensive and cumbersome statements of advice (SOA).

But Mr Taylor said he disagreed with Labor’s staged approach, an approach that the Coalition holds as unlikely to yield optimal results for both consumers and the industry.

The government’s hesitance to reintegrate banks into the advice landscape has also been met by disapproval by the Coalition.

Namely, under the government’s response, superannuation funds are slated to assume an expanded advisory role during the second regulatory phase, while the third phase encompasses further consultation on the remaining eight recommendations including the good advice duty and the role banks and insurers could play in the industry’s future.

“The rest of the package should be implemented in tandem – no carve outs, and no entrenched regulatory advantages – that reduce competition and leave consumers behind,” said Mr Taylor.

“This only stifles the potential of a report which I believe correctly identifies the barriers to good advice and provides elegant solutions that protect the interest of consumers, reduces red tape on advisers while providing scope for future innovation.

“This is essential not just for productivity but also support for the next generation.”

Touching on the government’s latest intergenerational report, specifically its projections on home ownership which showed the harsh reality faced by young Australians, Mr Taylor emphasised the significance of making advice more accessible.

“Research by McKinsey shows a quarter of Gen Z don’t expect to be able to retire. Yet more than half of Gen Z have some kind of investment and more than any other generation the pandemic has motivated them to improve their financial literacy.

“These users are currently shut out from conventional financial advice – a reflection not of the size of the market but the costs associated with the current regulatory regime.”

And in the absence of advice, he said, “we know they are going elsewhere”.

“The top three hashtags on Instagram beginning with money, investment and finance have more than 120 million posts between them. #Fintok has attracted more than 4.3 billion views globally,” Mr Taylor said.

He highlighted that this situation paves the way for numerous investment scams.

“We make the scam task much harder when we lock people out of better advice and send them into the arm of ‘finfluencers’.”

According to Mr Taylor, it is the younger generations that stand to benefit most from reform, especially the recommendations made by QAR reviewer Michelle Levy regarding the good advice duty and non-relevant providers.

“Reducing the red tape on financial advisers and opening the door to digital advice, to proportionate value-add services from insurers, banks and superfunds is a critical dividend of this report. It is why it should be implemented in full,” Mr Taylor said.

“It is why it should be the first of a broader suite of reforms to support our financial services sector to thrive. It will be good for productivity, and good for consumers – particularly younger Australians.”

‘You give good advice every day’

In a separate statement made available to ifa, shadow finance minister Jane Hume tried to clear up the confusion that has arisen around the definition of good advice.

Namely, while Ms Levy has insisted that the definition of good advice is simply the provision of advice that is neither bad nor mediocre, stakeholders have argued that this explanation is too vague and open to misinterpretation.

Most notably, the lead ombudsman for investments and advice at the Australian Financial Complaints Authority (AFCA), Shail Singh, suggested in May that he would expect an increase in disputes to follow the adoption of the good advice model.

“It will be a question of interpreting what good advice means by a non-relevant provider,” Mr Singh said at the time.

“I think there are risks in leaving it to industry to determine whether a non-relevant provider or a relevant provider should provide the advice because … there’s things that look on their surface, quite simple, that can have very severe consequences for consumers.”

However, according to Ms Hume, good advice is far less complicated.

“You know what good advice is because you give it every single day,” she said.

“Under that good advice model, the provider will need to think about the needs and the interests of the customer and personal advice will have to be good advice and this means providers will have to ask themselves what the customers and clients want and they will have to consider the purpose of their advice and the relevant needs and circumstances of their customers and clients,” Ms Hume continued.

“They will not be able to answer a specific question with a general response. That’s important because people don’t want a general response to a specific question. They won’t be able to provide that general advice warning and just send them off with a recommendation to seek financial advice. This will help improve the quality of advice that is available to consumers today. This is how we help them create wealth.”

While acknowledging the importance of engaging with the industry, Ms Hume also took a swipe at the government for taking its time on QAR-related matters.

“The assistant treasurer and the treasurer should be able to walk and chew gum at the same time as is expected of them. So the delay on those other recommendations creates uncertainty for an industry that is crying out for stability of policy settings after a considerable period of flux,” the shadow minister said.

“Advice is the missing piece of the puzzle for so many puzzles, retirement planning, superannuation, insurance, savings, investment, wealth creation, wealth accumulation, home ownership, estate planning, intergenerational wealth transfer, I know that I’m not teaching you anything that you don’t already know. But also navigating the cost-of-living crisis that we are facing right now. Advice is critical to this.

“Quality, affordable, accessible, common sense advice is fundamental to all of this and we want it to be ubiquitous,” she concluded.

ifa recently learnt that the government has been holding roundtables with key stakeholders in the advice industry ahead of possibly announcing draft regulation later this year.