Broker clients overwhelmingly getting a better deal: Assistant Treasurer

Speaking on the radio on Tuesday morning (13 June), Mr Jones highlighted that many borrowers are able to make use of broker services to access “better deals” on their home loans, whereas the majority of Australians are unable to access financial products due to a lack of adviser numbers and the cost barrier.

When asked whether lenders and insurers should be “forced” to give good advice so that the consumer can be “assured that the advice they’re getting is good about what’s best for them”, Mr Jones commented: “In the area of mortgages, Australians are already doing that. They’re approaching their mortgage advisers and there is no shortage of mortgage brokers who are providing – currently today – that advice to consumers about how to get the best mortgage available. That’s overwhelming the relationship that people have with their banks and their credit providers.”

When asked whether he would advise anyone who is “not sure at the moment whether their mortgage is the best one” to go and see a mortgage broker, the Assistant Treasurer stated: “It’s what Australians are doing right now. And they’re getting – overwhelming[ly] – they’re finding a better deal through their mortgage broker than they would otherwise provide.

“And that’s not happening in the area of retirement and income advice because there’s a shortage of advisers, and the current rules make it almost impossible for the funds to provide that information to their members,” he continued.

Indeed, the Assistant Treasurer flagged this week that more than 10,000 financial advisers have left the industry since 2019 as a result of widespread reforms in the sector, including the Future of Financial Advice and recommendations from the banking royal commission.

There are believed to now be only 16,000 financial advisers in Australia today.

The government’s QAR response

As such, the final report of the Quality of Advice Review (QAR) was handed to government last year, with author Michelle Levy outlining 22 recommendations for improving the accessibility and affordability of “quality financial advice”.

The Assistant Treasurer has now confirmed that the Albanese government will adopt the bulk of Quality of Advice review recommendations to “ensure Australians have access to reliable and affordable financial advice”.

Fourteen of the 22 recommendations have been adopted in full or in principle.

The 14 recommendations will be adopted under three streams, which will involve:

• Streamlining documentation and removing the safe harbour steps from financial advisers’ Best Interest Duty
• Expanding access to retirement income advice by expanding the provision of personal advice by superannuation funds to their members
• Exploring new channels for advice through other financial institutions (in consultation with industry) such as allowing ‘non‑relevant providers’ to provide personal advice

Explaining the decision to only adopt 14, Mr Jones commented: “We don’t want to hold up the urgent, while trying to agree on everything else.

“There are also some problems that have a ready‑made answer. Others are tougher nuts to crack.

“And so, I think we can move quickly on the former, while working together to solve the latter.”

Other reforms of note include:

• Introducing standardised consumer consent requirements for life, general and consumer credit insurance commissions
• Replacing Statements of Advice with a shorter financial advice record for consumers
• Conducting a review of the Code of Ethics for financial advisers
• Broadening the definition of personal advice
• Removing the general advice warning
• Introducing a good advice duty

The Assistant Treasurer said government will conduct consultations to test how these proposals might operate under different advice models, including digital advice models, and across sectors.

Consultation will also consider practical policy design and implementation issues, including in relation to consumer protections.

The government will issue its final response on the Delivering Better Financial Outcomes package later in 2023.

Noting that five million Australians are approaching retirement and will need assistance navigating the pension and superannuation systems, Minister Jones said the reforms aimsto “address the high cost of advice, better protect consumers, bolster ethical standards and ensure Australians can access helpful information that could make a meaningful difference to their quality of life in retirement”.

“This advice gap is leading to worse outcomes for members.

"Superannuation funds have told me that they have many retirees who have not switched from the accumulation phase to a tax‑free pension account.

"This might be good for the Treasury coffers, but it’s not good for members.

"I’m also told there are thousands who miss out on the Age Pension and other benefits that they are entitled to, simply because they didn’t know who to ask. Or because they assumed their super fund was already doing this for them. We can do so much better,” he said in a speech to the Association of Superannuation Funds of Australia on Tuesday.

Yesterday (14 June), Minister Jones also introduced to Parliament Labor’s pre-election commitment to create a pathway for experienced advisers with a clean record to continue practising without the need to undertake further education.

Mr Jones said this would “soften the landing as the sector transitions towards a fully professional industry, without compromising standards”.

[Related: Credit facilities should be regulated as financial products: Levy]