Key players in the superannuation, banking and insurance industries have laid out the welcome mat for the Australian Government’s latest financial advice reforms but they are seeking more details and still see more room for improvement.
Feedback from the industries most affected by the changes was broadly positive with many specifically saying they ‘welcomed’ the announcement made on 4 December.
But some industry bodies were cautious, wondering why the role of accountants was overlooked, expressing concern insurance companies may face barriers to providing simple advice or calling for more work to be done.
Unveiling the latest initiatives under the Delivering Better Financial Outcomes package, Financial Services Minister and Assistant Treasurer Stephen Jones said millions of Australians were unable to get the financial advice and information they needed.
He said financial advice was too expensive and “strangled by red tape” with research showing 80% of Australians aged 45–54 needed the service but could not afford it while 74% of those aged 18 to 34 had unmet advice needs.
The cost of financial advice has increased to more than $5,000, according to the Financial Services Council (FSC) because of increasing regulation, bans on conflicted remuneration and higher education requirements.
“Without affordable advice, Australians will either get no advice – which leads to lower standards of living – or seek advice from dodgy sources and scammers. The status quo of the financial advice laws is unacceptable,” Jones said in a statement.
The Government was responding to the recommendations made in 2023 in the Quality of Advice Review.
The key reforms included:
- creating a new class of diploma-qualified financial advisers to give limited financial advice at an affordable price
- allowing some advice to be paid from superannuation, either directly from a member’s own account or collectively from all members’ accounts
- modernising the ‘best interests duty’ by providing legal clarity that will allow advice on single or limited scope issues if this meets the client’s needs
- removing the ‘safe harbour’ steps that had come to be interpreted to mean financial advice must always be comprehensive, and
- replacing statements of advice with plain-English documents that help consumers make informed decisions.
“FSC modelling has shown that financial advice reform will reduce the cost of providing advice by 40%,” FSC CEO Blake Briggs said in a statement.
He said limiting ensuring the new class of advisers (NCAs) to simple advice that distinguished them from professional financial advisers was critical for further consultation.
“The Government’s direction of travel is positive however, with critical details yet to be confirmed, industry support is qualified,” Briggs said.
Reforms welcome but room for improvement
SMSF (Self-Managed Super Fund) Association CEO Peter Burgess said although reforms were needed to reduce the cost of advice and to open new channels of advice, it was mysterious why the significant role of advisers such as accountants was overlooked.
“By giving accountants a defined advice role, it will further support consumers to access the advice they need when they want it from their choice of trusted adviser,” Burgess said in a statement.
This view is supported by Chartered Accountants Australia and New Zealand (CA ANZ), which said the shortage of financial advisers was unlikely to change fast enough even allowing for the Delivering Better Financial Outcomes announcement.
“Our members are highly trained and skilled and can assist, but the regulatory environment needs urgent reform to allow those in public practice to assist their clients with their everyday financial challenges,” CA ANZ said in a submission.
The Insurance Council of Australia (ICA) said the NCA, if implemented carefully, created opportunities for insurers to provide simple advice to customers about their policies, such as choosing the level of cover.
“To take full advantage of these reforms, it will be important that the level of qualification for NCAs is appropriate and does not create barriers for insurers to provide simple advice to their customers,” the ICA said in a statement.
Financial Advice Association of Australia CEO Sarah Abood said the ranks of professional advisers needed to be urgently replenished as the numbers had halved in the last five years to about 16,000.
“We encourage the government not to take its foot off the pedal with the pace of reform and to continue its commitment to reduce the regulatory burden of providing advice,” Abood said in a statement.
Super bodies supportive
The reforms were also welcomed by the peak bodies for the $4.1 trillion superannuation industry, the Association of Superannuation Funds of Australia (ASFA) and Super Members Council (SMC).
ASFA CEO Mary Delahunty said research showed one in two Australians had never accessed advice in preparing for retirement, reinforcing the need for quality, trusted financial advice to be more accessible and affordable.
“ASFA is pleased to see that creation of the New Class of Advisers is accompanied by strong regulations and consumer protections to ensure high standards are maintained, alongside the increased provision of high-quality financial advice,” Delahunty said in a statement.
SMC CEO Misha Schubert said the organisation was pleased to see the strengthened certainty in the package for super funds to ‘nudge’ members at key life stages with tailored prompts to help support members most strongly for retirement.
“Getting more Australians low-cost but high-quality financial advice is the missing piece of the retirement puzzle and this announcement is welcome progress in addressing the advice gap,” Schubert said in a statement.
Assistant Treasurer and Shadow Minister for Financial Services Luke Howarth called on the Government to legislate the recommendations of the Quality of Advice Review.
“After 720 days of waiting, we now have a third government response to the Levy Review but still no draft legislation,” Howarth said.
“The Government has left the Levy Review’s most important, red tape reducing recommendations to the last minute and they are now at risk of not being legislated at all.
“We will examine the detail when it is available and work constructively to progress any sensible proposals, but it is important these reforms rebuild the advice industry and serve consumers.”