- The Australian financial services industry is in dire need of more financial advisers to support the 5 million Australians approaching retirement.
- The QAR recommendations aim to improve accessibility to quality financial advice, however the final report does not make any recommendations on the role of accountants in providing financial advice, even though this was a specific term of reference.
- The IPA advocates for the QAR to change legislation so that accountants can provide advice to clients as part of their ordinary tax agent services. This could help to fill the current shortage in the industry.
- The QAR recommends removing the safe harbour provision, which the Minister indicated is likely to be adopted.
The urgent need for more financial advisers in Australia was thrust into the spotlight at a breakfast last week with the Hon. Stephen Jones MP, Minister for Financial Services.
With only 16,000 financial advisers in Australia, there simply aren’t enough financial advisers to support the 5 million Australians approaching retirement, explained Minister Jones, describing the situation as a “hot mess” and a “crisis in retirement”.
To rectify the problem of accessible advice for Australian consumers, the former government appointed Allens Partner Michelle Levy as the Independent Reviewer to undertake the QAR to examine how Australia’s regulatory framework could better enable the provision of high quality, accessible and affordable financial advice. The QAR final report was released to the public last month with 22 recommendations that are now being considered by the Albanese Government.
Some of these recommendations include simplifying Statements of Advice and fee disclosure statements – measures that Minister Jones described as “low hanging fruit” – which could help to reduce red tape in the industry.
If these recommendations are adopted, it will be easier for all advice providers authorised by an AFS licensee to provide personal advice to their clients. However, the QAR stops short of recommending that accountants be able to provide financial advice outside of the existing regulatory framework. If the recommendations were to be adopted in their current form, accountants would remain unable to provide advice more broadly about superannuation needs without being an AFS licensee or a representative of an AFS licensee.
Advocating for accountants to provide advice
When Minister Jones was asked about the role accountants could play as financial advisers, he responded that he “didn’t want to make the problem bigger than it is”.
However, his messages that “not every Australian needs complex advice” and, “there has to be a role for financial institutions to provide advice” indicate that the government may be open to a wide range of different people providing advice.
This could open the door to accountants who don’t have an AFS licence or aren’t an authorised representative providing advice to clients on topics such as superannuation, including whether to establish a self-managed super-fund (SMSFs). The IPA has argued for many years that SMSFs should not be treated as a financial product.
“Australians need basic information so they can make good decisions,” said Minister Jones, explaining that the policy reforms from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Haynes Royal Commission), which introduced new requirements around qualifications, authorisation and disclosures to clients, have “protected Australians from bad advice, but also from good financial advice”.
As trusted advisers to their clients, accountants are well-positioned to fill the current skills gap in the industry and provide basic advice to those who require it.
Minister Jones emphasised that once the budget is complete, the government’s main focus will move to other issues, which will probably include reviewing the QAR recommendations.
He added that the QAR recommendations would be subject to stress testing and further expert analysis before the government adopts these recommendations.
Unpacking the proposed super changes
The minister also discussed the role of registrable superannuation entities (RSEs), alongside the superannuation changes proposed in the QAR recommendations.
“There is a role for RSEs to provide advice,” said Minister Jones.
Despite scrutiny in recent years of performance tests for superannuation funds, the Minister sounded emphatic in stating that performance tests would remain, even though some adjustment might be needed.
The QAR recommends creating a new Statutory Best Interests Duty (BID) that would be a “true fiduciary duty” reflecting general law and not including a safe harbour, citing Commissioner Hayne’s criticism of the use of safe harbour as a tick-box exercise.
The proposed new BID would apply only to financial advisers (relevant providers).
Discussing the QAR’s recommendation to remove the safe harbour provision of the best interests duty, the Minister said this was an “easy and not controversial thing to remove”.
It was acknowledged that advisers find the provision restrictive, and licensees [including super funds] rely too heavily on it as a “risk management tool”.
Unless the funnel of new advisers conceived under the QAR includes accountants, then the IPA will continue advocating for changes to redefine SMSF-related advice as a ‘tax agent service’ under the Tax Agent Services Act 2009 and not as financial advice under the Corporations Act 2001.
Vicki Stylianou is Group Executive Advocacy and Policy at IPA.
