Financial Services Minister Stephen Jones unveiled the government’s much anticipated response to the Quality of Advice Review (QAR) on Tuesday.
Speaking to a small audience of superannuation fund CEOs and senior industry executives at a breakfast hosted by ASFA, Mr Jones revealed the government will accept 14 of the 22 recommendations made by QAR lead Michelle Levy.
The government’s legislative response to the QAR will be divided into three streams, according to the minister’s speech seen by InvestorDaily.
Under stream one, Mr Jones said the government intends to scrap fee disclosure statements, while replacing statements of advice (SOAs) with “fit-for-purpose” advice records.
Moreover, under the initial stream, the government will eliminate the safe harbour steps from the best interests duty, consolidate the ongoing fee renewal and consent requirements into a single form, and introduce standardised consumer consent requirements to classify a consumer as a wholesale or sophisticated client.
The government will also simplify certain exemptions to the ban on conflicted remuneration, while removing others, and introduce standardised consumer consent requirements for life, general, and consumer credit insurance commissions.
Stream two of the reforms — dubbed the “expanding access to retirement income advice” stream — will see superannuation funds expand their provision of advice, with Mr Jones vowing to remove restrictions on collective charging of members for advice.
Moreover, superannuation trustees will be provided with legal clarity around current practices for the payment of adviser service fees.
Expounding on the government’s thought process, Mr Jones said funds “must play” an expanded and more effective role that serves the needs of their members.
“In fact, government has already told them they need to do more,” the minister said.
Mr Jones stressed that super funds are “well-suited to safely meeting the needs of their members”.
“They are already governed by strong obligations to act in the best financial interests of members and act for the sole purpose of providing retirement benefits to members.”
The minister, however, clarified that further consultation may be necessary to address questions regarding the scope of advice that can be provided by a fund, the education standards needed for an employee or representative of that fund, as well as how funds are held to an appropriate duty.
Funds welcome government’s response
In a joint statement on Tuesday, Australian Retirement Trust (ART) and AustralianSuper welcomed the response delivered by the minister, with Aware Super making its support known in a separate statement.
Responding to Mr Jones’ announcement, ART chief executive officer Bernard Reilly said the reforms would ensure more Australians are accessing advice which, he noted, “has the power to materially change people’s lives”.
“These reforms will empower members to have greater choice in relation to how they access financial advice, whether that be through their super fund, digital channels or external financial advisers,” said Mr Reilly.
Earlier this year, in a chat to InvestorDaily’s sister brand, ifa, Anne Fuchs, ART’s head of advice, confirmed that the fund is already working on an “end-to-end digital advice platform” — encompassing calculators, DIY advice through and human-led intra-fund advice — which it plans to launch in the market by the end of next year.
Advice to become cheaper for members
Also commenting on the minister’s announcement, AustralianSuper chief executive Paul Schroder said the adoption of the QAR recommendation proposing amendments to restrictions on collective charging to allow super funds to provide more advice would simplify access to financial advice while making it cheaper for members within the context of appropriate consumer protections.
Mr Schroder hinted that AustralianSuper, too, would turn to digital solutions to help it make advice more widely accessible.
“Superannuation funds are the right vehicles for these reforms as there is already very strong legislation — governing fiduciary duty — in place to ensure funds such as AustralianSuper act in the best financial interests of members with the sole purpose of generating the best possible financial outcome for members in retirement,” Mr Schroder said.
“This is a positive step forward for millions of members as they will now be able to access the level of financial advice they require. The removal of barriers on the provision of digital advice is a game changer, whether that is simple guidance to assist members in delivering an income in conjunction with the Aged Pension or more complex advice needs.”
The two largest funds also added that they “look forward” to working with the government “further” on the format of what a “fit-for-purpose” advice record will look like, how collective charging will work in the best interests of members, as well as streamlining the ability to pay for retirement planning advice from their super fund.
Winners are ‘hardworking Australians’
Separately, Aware Super’s chief executive officer, Deanne Stewart, said the winners from the announced changes are “hardworking Australians”.
“We welcome today’s announcement by the Assistant Treasurer because it recognises what super funds have seen coming for a long time — the urgent need for Australians to have access to high-quality, personalised financial advice to help them get ready for, transition to, and enjoy their retirement,” said Ms Stewart.
She assessed that “implemented well”, the government’s proposed reforms will allow Aware Super to “truly change the way we help our members”.
“Superannuation has always been designed to provide a retirement income for Australian workers, and as a super fund, we set out to help every Australian achieve their best possible retirement. That includes having easy access to affordable, understandable, high-quality financial advice at the moments when they need it most, such as setting up a retirement income stream, or understanding and realising your full Centrelink entitlements,” Ms Stewart stressed.
She highlighted data held by the fund which showed that members who receive advice draw down more of their savings as income in retirement than non-advised members.
“Advised members recorded nearly two and a half times greater voluntary, tax-efficient contributions of non-advised members,” Ms Stewart said.
Ultimately, she added, advised members “report feeling more confident” about their financial position heading into retirement.
ISA backs ‘sensible reforms’
Industry Super Australia (ISA) also offered its support on Tuesday, noting that intra-fund advice will allow funds to offer the information “members need for retirement planning”.
“Empowering funds to provide relevant information — like family member pension eligibility and tax obligations is a sensible step that will help members,” said ISA chief executive Bernie Dean.
ISA also revealed that according to its surveys, general advice and intra-fund advice are the most dominant service members access, with very few opting for comprehensive personal advice.
Combined, these offerings comprise 95 per cent of all advice provided by surveyed funds, with less than 1 per cent of members referred to comprehensive personal advice.
I suppose these dudes will be at least completing the ethics exam?