Govt makes QAR final report public
The Federal Government has made public the final recommendations of the Quality of Advice Review with key elements around personal advice, general advice and relevant providers.
The following represent the top 12 recommendations.
Recommendation 1 – Personal advice
The definition of personal advice in the Corporations Act should be broadened so that all financial product advice will be personal advice if it is given to a client in a personal interaction or personalised communication by a provider of advice who has (or whose related body corporate has) information about the client’s financial situation or one or more of their objectives or needs. Personal advice means financial product advice prepared or adjusted for or directed to a particular client in circumstances where: a) the client tells the provider of the advice their financial situation or one or more of their objectives or needs; or b) the licensee responsible for the advice, or a related entity of the licensee, if the licensee is a body corporate, holds information about the client’s financial situation or one or more of their objectives or needs.
Recommendation 2 – General advice General advice should continue to be a financial service, but the requirement for a general advice warning to accompany general advice should be removed.
Recommendation 3 – Relevant providers Amend the Corporations Act to provide that personal advice must be provided by a relevant provider where: a) the provider is an individual; and b) either: i) the client pays a fee for the advice; or ii) the issuer of the product pays a commission for the sale of the product to which the personal advice relates. In all other cases, personal advice can be provided by a person who is not a relevant provider.
Recommendation 4 – Good Advice Duty A person who provides personal advice to a retail client must provide the client with good advice. Good advice means personal advice that is, at the time it is provided: a) fit for purpose having regard to: i) if the advice is: 1) given in response to a request, question or inquiry from the client, the purpose of the client that the provider is aware of or should reasonably be aware of; or 2) volunteered by the provider, the reason the provider reasonably considers the advice might be of use or benefit to the client; ii) the scope, content and nature of the advice; and iii) the likely relevant circumstances of the client; and b) in all the circumstances, good. If the advice is provided by a financial adviser (relevant provider), this duty applies to the financial adviser. In all other cases, this duty applies to the AFS licensee.
Recommendation 5 – Statutory Best Interests Duty The existing best interests duty and related obligations (the duty to give appropriate advice assuming the best interests duty is satisfied, the duty to warn the client if the advice is based on inadequate or insufficient information and the duty of priority if there is a conflict) should be replaced with a new statutory best interests duty. The new best interests duty would be a true fiduciary duty that reflects the general law and will not include a safe harbour. This duty will apply only to financial advisers (relevant providers).
Recommendation 6 – Superannuation advice 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. In doing so, trustees will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice. Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.
Recommendation 7 – Deduction of adviser fees from superannuation Superannuation trustees should be able to pay a fee from a member’s superannuation account to an adviser for personal advice provided to the member about the member’s interest in the fund on the direction of the member.
Recommendation 8 – Ongoing fee arrangements and consent requirements The current provisions which require a provider of advice to give a fee disclosure statement to the client, to obtain the client’s agreement to renew an ongoing fee arrangement and the client’s consent to deduct advice fees should be replaced. Providers should still be required to obtain their client’s consent on an annual basis to renew an ongoing fee arrangement, but they should be able to do so using a single ‘consent form’. The consent form should explain the services that will be provided and the fee the adviser proposes to charge over the following 12 months. The consent form should also authorise the deduction of advice fees from the client’s financial product and should be able to be relied on by the product issuer. The form should be prescribed.
Recommendation 9 – Statement of advice The requirement to provide a statement of advice (or record of advice) should be replaced with the requirement for providers of personal advice to retail clients to maintain complete records of the advice provided and to provide written advice on request by the client. Clients should be asked whether they would like written advice before or at the time the advice is provided and a request for written advice is required to be made before, or at the time the advice is provided. This requirement will not apply to a person who is currently exempt from the requirement to provide statements of advice (e.g. a person who provides personal advice about general insurance products). ASIC should provide guidance on how advice providers may comply with their record-keeping obligations.
Recommendation 10 – Financial Services Guide Providers of personal advice should either continue to give their clients a financial services guide or make information publicly available on their website about the remuneration and any other benefits the provider receives (if any) in connection with the financial services they provide and their internal and external dispute resolution procedures (and how to access them).
Recommendation 11 – Consent requirements for wholesale clients The Corporations Act should be amended to require a client who meets the assets and income threshold and who has an accountant’s certificate to provide a written consent to being treated as a wholesale client. The written consent should contain an acknowledgment that is given before they are provided with a financial product or service that: • the advice provider is not required to be a relevant provider and accordingly they will not have to comply with the professional standards; • the advice provider will not have a duty to give good advice or to act in the best interests of the client under the Corporations Act; • the advice provider is not required to give the client a product disclosure statement or financial services guide; and • the client will not be entitled to complain about the advice under the AFS licensee’s internal dispute resolution procedures or to AFCA. The existing consent requirements for sophisticated investors should be amended to require a written acknowledgement in the same terms.
Some good points, some not so. Govt will have last say, I guess.
QAR was always about allowing Industry Super Funds to give personal advice regarding TTR Pensions & Account Based Pensions without Statements of Advice, but collectively paid for by members not receiving that advice. This is socialism.
Union (“Industry”) super funds already do this and much more, safe in the knowledge regulators will always turn a blind eye to union fund illegality. QAR was about legalising it so private sector product companies could do it too.
Struggling to see why this won’t create a field day for finfluencers.
Recommendation 3. Exempt if commission is not paid. Commissions on financial products is already illegal. But bonuses to indentured staff are not commissions.
Back to the future. Customer advice records, no SoA’s, tied agents of product flogging banks and union funds.
This is a retrograde step of 3-4 decades.
Long live vertical integration.
Long live product funded distribution costs under the BS guise of advice.
This is a pathetic outcome and in no one’s best interest except the banks and unions.
“Commissions on financial products is already illegal.” I take it you don’t do any insurance advice?
Got me on a technicality risky. Was thinking union super funds and bank products. Change to commissions on investment products.
But it’s not technically a commission when it is bundled up in Admin fees via Intra Fund Sales / Advice and allowed to be charged to every member when most members don’t get advice.
HIDDEN COMMISSIONS now recommended to be expressly allowed on mass and boom, Commissions on Super / Investments back in play, just with zero disclosure and massive HIDDEN COMMISSIONS for NO Service to the majority of members
Finfluencers are not relevant providers so can’t take advantage of these proposed recommendations
From Rec 1:
“by a provider of advice who has (or whose related body corporate has) information about the client’s financial situation or one or more of their objectives or needs.”
Finfluencers can’t possibly have any information, why is this not the get out of jail free card?
12 points? whats the last one?
Read these three key statements side by side and let it sink in. This has always been about allowing corporations to grow their businesses. Major short term memory loss since the Banking Royal Commission. Financial Advisers have been put through additional training on ethics, tested on their understanding of the law and all for what… it appears if you are a product provider receiving remuneration through product fees and recommending your own product you do not have any statutory best interest duty…. there is no difference… remuneration is remuneration no matter how you want to dress it.
Recommendation 3 – Relevant providers Amend the Corporations Act to provide that personal advice must be provided by a relevant provider where: a) the provider is an individual; and b) either: i) the client pays a fee for the advice; or ii) the issuer of the product pays a commission for the sale of the product to which the personal advice relates. In all other cases, personal advice can be provided by a person who is not a relevant provider.
Recommendation 6 – Superannuation advice 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. In doing so, trustees will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice. Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.
Recommendation 5 – Statutory Best Interests Duty The existing best interests duty and related obligations (the duty to give appropriate advice assuming the best interests duty is satisfied, the duty to warn the client if the advice is based on inadequate or insufficient information and the duty of priority if there is a conflict) should be replaced with a new statutory best interests duty. The new best interests duty would be a true fiduciary duty that reflects the general law and will not include a safe harbour. This duty will apply only to financial advisers (relevant providers).
This comment is frightening……… leading to recommendation 6
Most (although not all) superannuation funds have told us they would like to be able to provide more intra-fund advice to their members, by which I think they mean that they want to provide that advice on a collectively charged basis
She has interpreted comments, she should KNOW what they mean or ask more questions before making a decision that benefits one of the elements of the industry and severely disadvantages another. This one recommendation has huge impacts
Recommendation 12 – Financial Adviser’s can be registered directly with ASIC, without the need for intermediary licence groups.
What impact does this have on CRIS fees?
Will likely increase these as a single adviser AFSL pays the same AFSL fee as other larger dealer groups plus a fee per adviser (which is typically recovered from the adviser)…
As expected, opens the door back up to industry funds and banks to provide advice. Best Interest / Good Advice Duty are all motherhood statements until there is some detail attached to them with it likely that the government will poorly implement the changes given the track record of the bureaucracy over recent years. Same with SOA’s and whatever will replace them. FDS will hopefully improve so at least that is one positive.
So I guess the “Relevant Provider” cohort will now be funding the Compensation Scheme of No Return for complaints made by clients of “Non-Relevant Providers” as well. 🙁
Looks like there is no recourse for consumers when big corporate miss behaves – should be fair across the industry with no distinction between individual, corporate or trustee.
🙁
It took these ‘QAR Reviewers’ how long to come up with this?
Recommendation 6 is sketchy – especially by parties providing this advice who are motivated by retention and growing FUM.
Looks like we’ll go back to 30,000 participants giving advice.
25,000 phone based product floggers and 5,000 proper advisers.
General Advice = Product Information.
The fact the QAR has opened to door to confuse Real Advice more with General Advice / Product information is a total disaster.
And as expected the QAR is designed to flog more product from product providers by call centre jockeys under the false hood of bloody General Advice or Super Fund personal Advice that is charged to All members when very few members get that Advice.
Real Advisers stitched up yet again.
Welcome back product floggers and hidden commissions on mass.
Very disappointing overall folks.
Get the legs launched and let’s go!
Collective charging of fees, which doesn’t need to be disclosed – Sounds awfully like trail commissions on investment that was banned, but somehow its now OK for product providers to do the same thing.
As an Adviser, it sounds like it might be good just to be employed by a product provider and just give half-arsed “advice” (conflicted and in self-interest).
Maybe a good option.
All Real Advisers make their own SMA’s and boom we are product providers and can flog, flog, flog product with the Insto’s, Industry Funds & Banks.
Forget Best Interest Duty and other Real Adviser rubbish and jump on the product flogging nil compliance approach.
But also we could provide Real Advice as part of the product flog with very little compliance.
Exactly! Or we could start the Financial Advisers Industry Fund, then we can all operate as you propose too! lol
I’d like to be in charge of the valuation methodology of the unlisted assets within this fund please. Where can I send my resume?
Great job Frank, job for the boys from the boys for sure, no resume required just a few who you know’s will do.
And of course have to be happy to manipulate unlisted Asset values as per Advisers request 🙂
C’mon Colin, remember that I’m independent and free of bias using approved methodology in valuing these things.
But I don’t want to say too much that might upset you. Otherwise you might go down the road to my competitor for a second opinion.
Also, I know more than the public markets about valuation because I’m the expert. So when I get it arguably wrong in the opinion of someone who might raise questions, you don’t have to worry mate as I am always correct.
It’s the public markets and the “Efficient Market Hypothesis” that is wrong.
Lol. To get the job at the Financial Advisers Industry Fund, you will need to setup every portfolio with extreme exposures to growth assets no matter the portfolio. Balanced funds need at least 98% growth, so we can then spruik the returns are so much better than any competitors (traditionally weighted) balanced fund. Obviously sprinkling in some unlisted asset returns that no one can verify will help our cause too. Can you do that Frank?
The elephant in the room is that Industry Funds can continue charging hundreds of millions pa in ongoing Intrafund advice fees, whereas retail advisers are lumbered with ongoing fee consent forms, inefficient red tape that doesn’t exist in any other nation on earth, apart from Australia.
It’s easy Steve, I’m going to hand in my license. Run our existing managed account with a revised MER and simply provide “advice” to any punter that calls us from deck of my beach house. If I get too many calls, or I can’t be bothered, I’ll employ a backpacker or two.
I’ll do no reviews, not care a jot about the long term outcomes to the punters, make double the money with 10% of the work.
If only I could live with myself by doing this and casting my clients aside and treating them as cash cow muppets like the banks and union funds do.
And if I chose to charge a fee for the managed account I do run (which I don’t presently charge) then that is conflicted REM.
The playing remains totally unbalanced, biased and run by the big end of town with their money, political influence and lobbyists.
The more things change the more the stay the same, or in the case of QAR, get worse.
It’s not the elephant in the room, its the elephant herd legally being encouraged to stomp its way through 90% of members super via HIDDEN COMMISSIONS FOR NO SERVICE.
100% Government Approved.
What a total Farce.
Seems Recommendation 1 is written to try and capture more of those advisers who are just providing General Financial advice. Ie Writing a bulk based email with trading ideas and should a sub respond and who also happens to be a client the advice is now personal(?) I guess the carve out is if the general advice adviser doesn’t have any current financial information and goals about the client (this excludes knowing what cash the clients has in their linked trading account and their current stock positions)
Sounds like the industry will be reverting back to what it was 15 years ago. What was the point in the Royal Commission changes? All hard work by remaining advisors over the past couple of years will be out the window. Ridiculous to see recommendation 6 in this proposal – where is non-bias? Only decent proposal is Recommendation 8
are you guys smoking something – really?
The report has always had the recommendations written long before LEVY acquiesced.
We have had two months of softening up – we have had the usual suspects with “their considered view ” in the wings – ready to construct the narrative.
This has been a media stunt from the very start.
A federal member – many years ago from QLD – an assistant to the financial services minister no less – identified in detail just after he released the FOFA report what was going to happen.
And those in the left side of Govt and their paymasters have delivered admirably. Nevertheless, it’s not about the cost – although that hits a nerve with the fee refugees – it’s about controlling all the outcomes. The ISN team want to revert to the pre-1980’s.
If I was an ISN manager I would be looking over my shoulder at Blackrock and Vanguard – when the big end of town wants your toys – you can rest assured they will get them. They are big enough now in a relatively small pool in global terms to be attractive to that end of the spectrum
A new word for the day –
Defenestration.
That is what has happened to all the advisers and their businesses. – but please don’t tell me you take it as a surprise.
No-one is surprised, just disgusted and therefore venting.
As Sir Humphrey Appleby (Yes Minister) once said, never hold an enquiry unless you know what the findings will be.
This was a stich up from the beginning for the banks and union funds, and usual, they win again.
https://www.youtube.com/watch?v=cIYfiRyPi3o 1 minutes and 20 seconds.