22 December 2023
The Australian Government provided a final response to the Quality of Advice review on 7 December 2023 (Government Final Response), as part of the Delivering Better Financial Outcomes package to improve accessibility, affordability and quality of financial advice for retail clients. This article provides a further overview of the Government Final Response with respect to the recommendations that it has accepted and the impact of the implementation of those recommendations on the financial services industry.
Our article, What does the Government’s Response to the Quality of Financial Advice Review Mean for the Financial Services Industry, provided an overview of Michelle Levy’s final report on the Quality of Advice Review on 8 February 2023 (Report), the Government’s response to the Report on 13 June 2023, and the potential impact of the implementation of the recommendations on the financial services industry. The Government Final Response builds on its response on 13 June 2023, which comprised three streams of reform.
The Government Final Response has accepted many of the Report’s recommendations and has categorised them into the following objectives, which are outlined in the table below:
- a modernised and flexible best interests duty;
- a new class of financial adviser;
- expanding superannuation advice; and
- a principles-based advice record.
The Government has already commenced progressing draft legislation with respect to 11 other recommendations. The Government will not proceed with recommendations 1, 2, 12.1 and 12.2 of the Report.
- The Government has chosen to ‘modernise’ the best interests duty rather than accept the ‘good advice’ duty recommended by the Report. This is arguably a more pragmatic approach as the ‘good advice’ duty gave rise to questions about the meaning and scope of that duty.
- There are concerns about the new class of financial advisers who are referred to as ‘qualified advisers’. That term would appear to be a misnomer because they will actually have less qualifications than other advisers, however it is the scope of what they can do that is limited or ‘qualified’ (for example, as a way of allowing banks to employ people to provide this advice).
- Recommendation 11 is being considered as part of the Treasury’s review into Managed Investment Schemes. On 14 November 2023, the Government released legislation to implement half of the Quality of Advice recommendations as part of tranche 1 of the Government Final Response.
As with the implementation of any recommendation into legislation, the devil will be in the detail. The Government aims to consult industry and consumer stakeholders with respect to the draft legislation over the course of next year, with a view to progressing it to Parliament for review and consideration before the end of 2024.
Following the implementation of the Government Final Response, the Financial Planners and Advisers Code of Ethics 2019 (Code) will also be reviewed to ensure that the Code aligns appropriately with the Government’s reforms to financial advice and remains fit-for-purpose.
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Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.