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The government is creating a new class of financial advice provider, which will grant banks and insurers the ability to give customers personal advice, among other changes.
The federal government has unveiled its Delivering Better Financial Outcomes package, a suite of changes that will continue the government’s reform of financial advice.
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Unveiling the package in Canberra on Thursday morning (7 December), the Minister for Financial Services Stephen Jones announced that the government would be introducing a new class of financial advice provider to “support an increase in the availability and affordability of simple personal advice”.
He highlighted that over 5 million Australians are at, or approaching, retirement and will require financial advice – however, with only 16,000 professional advisers (a number that has been dwindling in recent years following an overhaul of the financial planning requirements) – many people either cannot access, or afford, advice.
The government has been concerned that this vacuum has been filled by “fin‑fluencer’ on TikTok, Reddit, and other social media platforms”, which “at best, expos[es] consumers to unregulated advice, and at worst, to scammers”.
As recommended by the Quality of Advice Review – recommendation 3 – the government will be creating a new class of adviser, who will not be able to charge a fee or receive a commission relating to the personal advice they provide.
It is expected that this new class – to be termed ‘qualified advisers’ – will generally be employees of licensed financial institutions. The licensee will be wholly responsible for the advice provided.
However, the upcoming category of financial advisers will need to adhere to extra criteria not initially suggested by the review. This involves adhering to an updated best interests duty, ensuring that all individual advice aligns with a unified high standard. This move aims to instil trust in consumers regarding the quality of the advice they receive, regardless of its origin.
Furthermore, supplementary safeguards will be implemented to guarantee robust protections for consumers engaging with this new tier of advice providers. This includes increased responsibilities for Australian Financial Services Licensees and mandated minimum competency benchmarks for advisers.
The change effectively enables all financial institutions – including superannuation funds, life and general insurers, and banks – the ability to give customers some form of personal advice. A large part of the focus of the banking royal commission report of 2019 had sought to prevent this, due to misconduct and poor practices.
Legislation will be developed to implement this model in 2024.
According to Mr Jones, the reforms will “reduce unnecessary red tape that doesn’t add a consumer benefit and is making professional financial advice costly”.
“We must give consumers what they actually need,” the minister said on Thursday.
“We will also clarify that advice can cover only one or two, one or a few topics where this meets the client’s needs and objectives.”
The Assistant Treasurer and Minister for Financial Services continued: “The government promised to make financial advice easier to access when Australians need it and [this] announcement delivers on that commitment.
“With 5 million Aussies at or approaching retirement with more money than ever before, these reforms will help people make informed and safe financial decisions.
“This new access to financial advice will reduce the harm caused by scammers posing as ‘fin‑fluencers’, with investment scams representing over 60 per cent of all scam losses so far this year.
“Access to good advice can be key to helping Australians manage cost-of-living pressures.”
[Related: Australians need financial literacy improvement: AMP]
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