From QAR to Delivering Better Financial Outcomes

A modified best interest duty (eg removal of safe harbour steps).  The duty of priority and duty to give appropriate advice will be retained.

A written record of the advice will replace statements of advice with streamlined content.  There will be a greater focus on maintaining records that support the advice.

Changes to adviser standards to reflect the modified best interest duty, a streamlined record of advice and updated record keeping requirements.  Corresponding changes to adviser auditing processes.

Should consider the structure / model for providing intra-fund advice and whether to move to using qualified advisers.

No ability to charge for intra-fund advice provided by qualified advisers.  Potential change to the range of intra-fund advice topics.  Should ensure that qualified advisers meet competency standards.  Comply with additional consumer protection obligations that have not yet been released.

Should carefully consider who will be responsible for intra-fund advice provided by a qualified adviser, noting the Government statement that the authorising licensee will be wholly responsible for the advice provided by qualified advisers.

Confirming ability to consider a broad range of the member’s personal and household circumstances when giving intra-fund advice (ie ensure no breach of sole purpose test).

A streamlined written record of the will be required.  There will be a greater focus on maintaining records that support the advice.

Potential need for additional controls to ensure only deduct advice fees from their member’s superannuation accounts for permitted advice topics.

Will be allowed to give members personalised ‘nudges’ at key decision points in retirement income journey.

Ability to provide personal advice about own products without charge.  Should ensure that qualified advisers meet competency standards.  Comply with additional consumer protection obligations that have not yet been released.

Should carefully consider who will be responsible for advice provided by a qualified adviser, noting the Government statement that the authorising licensee will be wholly responsible for the advice provided by qualified advisers.

A streamlined written record of the advice will be required.  There will be a greater focus on maintaining records that support the advice.

For superannuation digital advice tools, potential change in the range of advice topics covered by such tools.

A modified best interest duty will apply (eg removal of safe harbour steps).  Existing duty of priority and duty to give appropriate advice will still apply.

A streamlined written record of the advice will replace statements of advice.

No changes.

Greater flexibility to interact with members through personalised ‘nudges’.

Best interests duty

• The Government states that it will ‘modernise’ the best interests duty. It states that the updated best interests duty will provide clearer support for scaled and limited scope advice and for advice where the advice provider has limited, but relevant information. 
• However, the announcement does not specify what amendments will be made to the best interests duty, except to confirm its previously announced position that it will remove the safe harbour steps. Arguably, merely removing the safe harbour steps will not achieve the above outcomes, so the Government may be planning further changes to the duty.
• The best interests duty will continue to apply to all providers of personal advice and regardless of how the advice is generated (ie whether from a discussion with a financial planner or a digital advice tool).

Duty of priority

• The announcement confirms that the duty of priority will continue and does not suggest any amendments to this duty.

Duty to give appropriate advice

• The Government has clearly determined not to replace the duty to give appropriate advice with a ‘good advice’ duty.
• This is because the announcement confirms that the requirement to provide advice that is appropriate to the client will be retained. However, the announcement goes on to explain that this will ensure that all advice is fit-for-purpose for their circumstances.
• The use of the phrase ‘fit-for-purpose’ is interesting because it is not currently used in relation to the duty to give appropriate advice, and instead formed part of the proposed definition of the duty to give good advice. Accordingly, it is not clear whether or not there will be any amendments to the duty to give appropriate advice or whether the Government instead believes that this is how the duty currently operates.

Ancillary matters

• There is no commentary on the duty to give a warning for advice provided on incomplete facts.
• The Government has confirmed that the existing concessional treatment for personal advice on defined basic products provided by banks and general insurers will be retained.

• The Government will introduce a new class of financial advice provider, called a ‘qualified adviser’ aimed to support availability and affordability of simple personal advice. The expectation is that qualified advisers will be employed by or otherwise provide personal advice on behalf of financial institutions about their own products.  It will remain to be seen whether qualified advisers can also provide personal advice about products issued by related parties to the financial institution.
• A qualified adviser will be prohibited from receiving a commission or charging a fee in relation to the personal advice provided.
• The adviser duties, modified as described above, will apply to qualified advisers and presumably qualified advisers will need to comply with the Financial Planners and Advisers Code of Ethics 2019.
• The Government will impose additional standards on qualified advisers but does not outline these standards, apart from the modified adviser duties.
• The Government is proposing to adopt additional consumer protection such as additional AFS license obligations and minimum competency standards for qualified advisers. However, presumably the educational standards for qualified advisers will be different (and likely lower) to those for financial planners.
• AFS licensees will be wholly responsible for advice provided by qualified advisers. As AFS licensees already have a form liability for advice provided by its authorised advisers, it is not clear if and how this announcement would impact the liability of licensees.
• It appears that qualified advisers will be required to provide records of personal advice provided, as per item 4 below.

• The Government will for superannuation advice:
  • Legislate which advice topics can be paid by clients from their superannuation. A single set of rules will apply to collectively charged intra-fund advice and personal advice paid for through the deduction of an advice fee from the person’s superannuation account. These new rules could require trustees to adopt additional controls to ensure compliance with the rules.
  • Allow superannuation funds to consider a broader range of factors which giving advice, such as age pension eligibility or spousal income. Arguably, a trustee is already required to take such factors into account when giving intra-fund advice, however, these changes would provide certainty that considering these factors will not breach the sole purpose test.
  • Assist superannuation trustees to meaningfully engage with members at key points of time in their retirement journey, including permitting personalised ‘nudges’ to members, for example, prompting members to consider how they may wish to drawdown their superannuation in retirement. Trustees should consider this announcement when considering their responses to the Retirement phase of superannuation Discussion Paper dated December 2023.

• Statement of Advice will be replaced with a principles-based advice record.
• The advice record must cover the following:
  • the subject matter/scope of the advice;
  • the advice provided;
  • the reasons for providing the advice; and
  • the cost of the advice to the client and/or any benefits received by the adviser.
• Advisers will continue to be required to give the advice record to clients.
• Additional record keeping obligations will be imposed on financial planners to ensure that key information that informs the advice is recorded appropriately.  The purpose is to ensure that the advice record does not contain information which can impact the ability of clients to understand the advice and make informed decisions.