Quality of Advice Review: unpacking the response
Regulatory -
On 13 June 2023, Minister for Financial Services the Hon. Stephen Jones released the Australian Government’s long-awaited response to the Quality of Advice Review (QAR). In it the Government accepted the bulk of the QAR reforms, either in whole or in part, withholding immediate support for others.
The response contains good news for Australians who would like to obtain financial advice from their superannuation fund. The Government accepted QAR recommendation 6 to lift restrictions on collective charging, which will support superannuation funds to provide more intrafund advice. The Government will also clarify in law the ability of fund members to use their superannuation to pay for personal financial advice provided by a financial adviser (QAR recommendation 7), de-risking what is existing practice for many funds.
Moreover, the Australian Government accepts that financial advice laws need to be updated to allow superannuation funds themselves to provide personal financial advice. While it is not yet clear what form these changes will ultimately take, the Government wants to facilitate superannuation funds playing a greater role in providing advice to members transitioning from employment to retirement.
Is this the end of the QAR process?
Not by a long shot. To work out how to implement its QAR response, Government will now undertake a detailed policy design process for each of the points it accepts, while further considering those that it accepts in principle or has reservations. This means more consultation with funds and other stakeholders.
Design priority will be given to what the Government calls stream one, which is a raft of changes aimed at removing regulatory red tape for advice provided by financial advisers. Some of these will be of direct interest to superannuation funds. For example, the content and format of new “advice records” setting out the advice provided to a customer will be relevant to all providers of advice. Stream one will also deal with how advice providers fulfil their duty to put their customers interests first, and the applicability of this duty to superannuation funds is a key question.
Consultation on changes related to recommendations 6 and 7, and of how fund provided personal advice is regulated more broadly, will be part of stream two and is slated for consultation later this year. It will likely occur concurrently with discussion concerning deeper system level changes listed under stream three of the Government’s response.
Overall, the release of the Government’s response signifies we are roughly at the midpoint of the quality of advice policy reform process, which formally kicked off in March 2022. Finalising the detail of the reforms, preparing and consulting on parliamentary bills, and passing these bills through parliament will probably take around another 12 to 18 months.