Not only does the government want to see superannuation funds expand their advisory powers, but on Thursday morning, Minister for Financial Services Stephen Jones said in Parliament that the government supports the creation of a new class of financial advice provider – to be called “qualified advisers”.
As recommended by the Quality of Advice Review – recommendation 3 – this new class of advisers will not be able to charge a fee or receive a commission relating to the personal advice they provide.
These individuals will generally be employees of licensed financial institutions, with the licensee set to assume full responsibility for the advice provided.
“We must give consumers what they actually need,” the minister said on Thursday.
“These changes will apply across all financial institutions, including superannuation funds, life and general insurers, and banks,” he clarified.
This announcement essentially grants banks and insurers the ability to give customers personal advice and unwinds some of the tough rules imposed by the Hayne royal commission.
But, according to the minister, the government does intend to establish safeguards by ensuring this new class of financial advice providers abides by additional standards that were not originally recommended by the QAR.
“Australians must be protected from bad products, bad advice, and bad marketing. And this has been the objective of much of the necessary change over the last decade,” the minister said.
“Financial advice has become subject to greater and greater regulation to prevent the worst. And to shift the advice industry away from being a salesforce towards being a professional. We’re not going to reverse that course," he assured.
In order to guarantee that some of the bigger institutions don’t revert to their old ways, the minister said these new advice providers will, alongside their professional peers, be subject to the same standard under a modernised best interests duty, while limitations will be placed on the scope of advice they can offer.
“We will also clarify that advice can cover only one or two, one or a few topics where this meets the client’s needs and objectives,” Mr Jones said.
Moreover, the minister reiterated that qualified advisers will be prohibited from charging a fee and from receiving a commission, which is also expected to help restrict their advice to simple advice.
“And on qualifications, as the name suggests, they will be required to meet a government-mandated education standard.
“The exact level of education will be determined in time, but a minimum standard of a diploma may be the right balance to be less onerous than the requirements for professional advisers,” the minister said.
Additionally, the government will introduce a comprehensive framework for superannuation advice by legislating consistent rules on what advice topics can be paid for via superannuation. The same list of advice topics will apply to collectively charged advice, and advice that is charged direct to the individual member’s superannuation account.
Funds will also be allowed to consider a broader range of a member’s personal and household circumstances such as debt, spouse’s income, or age pension eligibility.
“With 5 million Aussies at or approaching retirement with more money than ever before, these reforms will help people make informed and safe financial decisions,” the minister said.
While Minister Jones had vocally advocated for the broadening of advisory powers within superannuation funds, he maintained relative silence regarding whether similar rights would be extended to banks and insurers.
Legislation will be developed to implement this new advice model in 2024.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
