Quality of Advice Review: ensuring high quality, accessible and affordable financial advice

The Australian Government released the terms of reference for the Quality of Advice Review in March 2022, instructing the reviewer Michelle Levy to focus on the issues of advice quality, consumer access, and affordability. Based on the content of the interim review report issued in late August (the “Proposals Paper”), Ms Levy and her team have not only followed these instructions, but have heard loud and clear the calls for reform coming from across the financial services sector.

Many financial institutions submitting to the Quality of Advice Review identified a similar set of core problems. In summary, these submitters identified that providers of personal advice and general advice are each so bound in overlapping and intrusive levels of regulatory compliance, that it results in advice being difficult for consumers to obtain and expensive when they do. When consumers do manage to access an adviser, the resulting advice is too often shaped more by the process to produce it than by the consumer’s own wants and needs. 

Responding to these problems, Ms Levy has proposed a bold set of reforms that, if implemented, will make it easier for consumers to access quality advice, while reducing the cost to produce it. 

Expanding access to personal advice

One of the key issues being examined in the Review is the complexity and uncertainty imposed by the blurred line between personal advice and general advice. This significantly restricts the ability or willingness of many product issuers to be able to assist customers in the way either customers or product issuers would prefer. The Quality of Advice Review team have proposed to tackle this problem directly, by abolishing the category of general advice, while also making it less costly for product issuers who currently provide general advice (like many superannuation funds and life insurers), to become providers of personal advice.

To encourage product issuers to provider personal advice, the Review has proposed pivoting from regulating the process to produce advice, to regulating the outcomes of advice. It would do this by introducing a regulatory requirement for providers to provide “good advice”, defined as advice that would be reasonably likely to benefit the customer, having regard to the information that is available to the provider at the time the advice is provided. The Review also proposes to drop the requirement for product issuers providing simple and limited advice to meet the current “best interests duty” obligation. This means product providers would be able to answer basic questions about whether a product suits a customer’s expressed need, without also doing a deep dive into a customer’s circumstances, or comparing the product with all the others on the market.

Further supporting the provision of simple and limited advice is a proposal to streamline advice disclosure and current disclosure obligations, which require advisers to painstakingly document the advice process and outcomes. Instead, advice providers would only be required to maintain records of the advice they provide and to provide a written record of advice to a client upon request.
Intra-fund advice

To permit enhanced access to advice by superannuation members, the Review proposes removing existing restrictions on the collective charging of fees. It also says superannuation fund trustees should be able to take into account a member's personal circumstances when providing personal advice about the member’s interests in the fund. One of the goals of this is to support superannuation funds playing a greater role in member retirement planning.

Next steps 

A report will be provided to the Government by 16 December 2022. Government will then take some time to consider the report and its recommendations, with a response and policy roadmap likely in early 2023.