The Albanese Government is announcing further details of its next package of reforms to ensure Australians have access to quality and affordable financial advice.
Millions of Australians are unable to get the financial advice and information they need. It is too expensive and strangled by red tape. Research shows 4 in 5 Australians aged 45–54 need financial advice but cannot afford it, while 74 per cent of Australians aged 18 to 34 have unmet advice needs.
Without affordable advice, Australians will either get no advice – which leads to lower standards of living – or seek advice from dodgy sources and scammers. The status quo of the financial advice laws is unacceptable.
The government’s second tranche of the Delivering Better Financial Outcomes package will meet the needs of Australians by making high quality, safe and affordable financial advice available to more people. The next tranche will:
- create a new class of adviser to provide safe and simple advice to more Australians, such as choosing an insurance policy or basic questions about retirement;
- modernise the best interests duty by providing legal clarity that will allow advice on single or limited scope issues if this meets the client’s needs;
- remove the safe harbour steps so advisers can focus on their client’s needs – though well intentioned, the safe harbour steps have become interpreted to mean financial advice must always be comprehensive, even if that is not in the client’s interests;
- reform statements of advice so they help consumers make informed decisions;
- clarify the rules on what advice topics can be paid for through superannuation, including through collectively charged arrangements; and
- allow superannuation funds to provide helpful ‘nudges’ to drive greater member engagement at key life stages.
The new class of adviser will be restricted to providing advice on products issued by prudentially‑regulated entities. They will be prevented from providing advice on more complex topics, such as establishing a self‑managed superannuation fund or advising on a managed investment scheme, through a blacklist to be prescribed in regulations.
This will allow these advisers to focus on simple topics that most Australians would benefit from more information on. It will also ensure that there is a clear boundary between the new class of adviser and professional financial advisers. It is the Government’s vision that the new class of adviser serves as one entry‑point to rebuild the financial advice profession, and the Government remains committed to reforming the broader education pathways for financial advisers.
The Government anticipates some licensees will choose to indirectly charge for advice offerings. However, licensees will now have the option of charging a direct fee for advice provided by the new class of adviser. This will allow a greater range of institutions to employ the new class of adviser, delivering neutrality across different advice models and expanding the supply of quality advice available to consumers. The new class of adviser will not be permitted to charge ongoing fees or receive commissions.
The package contains strong protections for consumers. In addition to the restrictions above, the new class of adviser will be subject to the modernised best interests duty, as for professional financial advisers. Anti‑hawking restrictions will continue to apply, and the new class of adviser will be limited to customer‑initiated engagement for new customers, ensuring they cannot be used to cold‑call customers or offer unsolicited advice.
Licensees will also be subject to additional monitoring and supervision obligations (with civil penalties attached) to ensure that the new class of adviser only provides advice within their expertise and authorisation and comply with the best interests duty and other obligations.
These steps will provide greater choice and support to the millions of Australians seeking financial advice throughout their lives, while maintaining important safeguards.
The Government thanks all stakeholders for their thorough and constructive engagement which has helped to shape the reforms and build a consensus for this package. The Government is developing exposure draft legislation for public consultation based on these announced parameters.
Further information can be found on the Treasury website.