Amidst concerns the Quality of Advice Review would include every issue in the financial advice industry, the Government has refined the scope with simplification of regulation taking centre stage.
In an announcement released around lunch time on Friday afternoon, financial services minister Jane Hume outlined the review will focus on simplifying compliance and consumer protections.
The professional standards for financial advisers, as well as the new disciplinary and registration systems will not fall under the purview of the inquiry.
Changes to the definitions of ‘retail client’, ‘wholesale client’, and ‘sophisticated investor’, including the income and asset thresholds which the Stockbrokers and Financial Advisers Association opposed are also out.
Finally, financial services redress arrangements as well as the application of taxation and privacy laws to financial advice will also be excluded.
Association of Financial Advisers chief executive Phil Anderson tells Professional Planner he understands it is necessary for the scope of the review to be reduced so it could be manageable.
“This means that issues like the financial adviser education standard and the Code of Ethics will need to be addressed by the Government, rather than being referred to the review for a recommendation.”
Making the cut
While those items did not make the final list for the review there is still plenty to be covered.
Hume said at the start of the month the review will identify “sensible opportunities” for deregulation.
The safe harbour provision for the best interests duty is likely to be removed in line with Commissioner Hayne’s recommendation that “unless there is a clear justification for retaining (the safe harbour provision), it should be repealed”. Calls for it to be removed have gone on since best interests duty was introduced.
Financial advice documentation and disclosure requirements, including statements of advice, fee disclosure and consent requirements will be reviewed.
Scaled, intra-fund and limited in scope advice will be examined. Digital advice, which has long been touted by Hume to be part of the review, is confirmed to be in.
Key concepts such as ‘financial product advice’, ‘general advice’, ‘personal advice’, as well as how they are used and interpreted by consumers, will be looked at which will also take into consideration the review being undertaken by the Australian Law Reform Commission on the same issue.
Announced 11 months ago, the life insurance remuneration reforms and the life insurance framework was included as part of the review and will look at the remaining exemptions to the ban on conflicted remuneration.
Financial Planning Association chief executive Sarah Abood said the review will set a framework enabling financial planners to provide affordable, engaging, scalable and professional advice.
“The FPA welcomes the Quality of Advice Review as the perfect opportunity to measure and assess the impact of all this regulatory change on the profession, and address the unintended consequences created such as the tick a box, rules-based, compliance-heavy advice process that financial planners are currently required to comply with.”
The new face behind the review
Expect to see plenty of Michelle Levy in 2022 as she has become the chosen one to lead the much-anticipated review.
Levy is a partner at Allens specialising in superannuation, life insurance, distribution and financial services law.
She has been recognised by Chambers Asia‑Pacific for the past eight years as a leading lawyer in financial services regulation and superannuation.
She co‑authored the LexisNexis FoFA Handbook and is a member and former chair of the Law Council of Australia’s Superannuation Committee and a member of the ATO’s Superannuation Industry Stewardship Group.
“I believe there are many ways we can improve the regulation of financial advice, making it easier for Australians to receive quality advice when they need it and in a form they want,” Levy said in a media release on her appointment. “I am optimistic about what we can achieve.”
The final report will be tabled to the Government on 16 December, 2022.