With the Quality of Advice Review well into the consultation phase, we share an update on our response and suggest some ways for financial planners to have their say on regulatory reform to improve the quality and accessibility of financial advice.

What’s been happening

A key recommendation from the Hayne Royal Commission was for the government to conduct a review into the quality of financial advice. After releasing the terms of reference for the Quality of Advice review in early March 2022 and appointing Michelle Levy as Chair, the review shared an issues paper later that same month. Including 83 questions covering topics ranging from how to define quality of advice, to how advice can be made more accessible, the issues paper invites responses from across the financial advice profession.

The deadline for submissions in response to the issues paper is 3 June 2022. The review is expected to share its findings with government by 16 December 2022.

How are the FPA responding

The Quality of Advice Review presents our profession with a major opportunity to address complex problems that prevent consumers from accessing quality, affordable financial advice. It also has the potential to pave the way for regulatory reform to support a more sustainable advice ecosystem and enable financial planning businesses to better meet their clients’ diverse advice needs. To maximise the impact of our submission in response to the issues paper, we are working together with many other associations and professional bodies including the AFA, accounting bodies, licensees and the FSC to develop a more consolidated set of themes to highlight for the review committee.

The five themes we’re focussing on in our submission are broadly aligned with recommendations included in the Policy Platform released in 2020. These themes build on principles that we believe should inform and guide the future regulation of financial advice:

1. Let professionals be professionals
With the reforms and standards introduced in financial advice over the last decade or so, we now have financial planners who are educated, skilled and guided by ethical principles in their conduct. Many of the current regulations, and the licensee rules and requirements in response to these regulations, are giving them hoops to jump through that are no longer necessary given the ethical, educational and professional framework that now exists.

2. Regulatory certainty
With the volume and frequency of regulatory change financial planners have had to deal with, the requirements they need to satisfy have become confusing. There are situations where myths around what’s required by the regulator have become common practice. If we take SoAs as an example, the Corporations Act actually requires very little to be included in the advice document. But SoAs that are 80-100 pages long are now the norm. This shows a significant disconnect between what the law requires and what is actually happening during the advice process.

3. Sustainability of the profession and financial planning practices
For financial advice to be accessible to more and more Australians, it’s important for financial planners to be able to provide advice profitably and access clients. As things stand, the cost of providing advice is increasing year on year while the profession continues to see a sharp decline in planner numbers. For the profession to thrive, the regulatory framework should provide flexibility for planners to provide advice in a way that makes it affordable for clients and returns a reasonable profit to their business.

4. Innovation and data
Regulation should create more opportunities for planners to use technology to provide a better advice experience and outcomes. This includes access to data and introduction of data standards to allow planners to more easily provide advice across a client’s entire financial situation. Access to ATO and Centrelink data and integrating this with products for straight through processing will make the advice process easier and smoother for clients, planners and product providers.

5. Advice is fit for purpose for the client
Current regulations restrict planners’ ability to meet all their clients’ financial advice needs. They can’t provide credit advice to clients, for example, preventing them from helping clients with debt management which can be critical in setting them up for financial wellbeing and improving their wealth position.

These themes sit across many of the questions that regulatory reform can be expected to address. How clients should be paying for advice comes under themes two, three and five. Delivering digital advice touches on themes three, four and five. If the review can help in all of these five areas we can expect to see progress towards a more practical, flexible and fit-for-purpose regulatory framework for providing affordable advice that meets the needs of everyday Australians.

Have your say before 3 June 2022

With submissions on the issues paper due by 3 June, we welcome ideas, experiences and insights from members our own submission response. You can join our conversations on FPA Community and take part in surveys and a Time in Motion study that we’re conducting to determine just how much it’s costing to deliver advice. We also encourage you to take time to make your own submission to the review.

Find out more on the Quality of Advice review.