“Quality Advice Review” Consultation Paper CP Review

Some highlights from my perspective….

• The concept of “good advice” is the “old made new again”. It’s simply a new term for something that has already been happening and is part of the compliance and regulatory landscape – s961B & G may go, however the idea is advisers will provide advice that is “reasonably likely to benefit” clients “having regard to the information that is available to the provider at the time the advice is provided.”

• The CP states the FOFA reforms created a situation where “The duty directs attention to the adviser’s purpose and process rather than to the substance of the advice.”  The CP predicts “A duty to give good advice … will allow providers to decide what they need to do to ensure their advice is in fact good advice.”

The idea of the CP is “good advice” should focus on the “quality of the advice” and not the process followed to create the advice.

• Broadening the definition of “personal advice” makes sense and helps to avoid the “dancing around” sometimes used under the existing definition.

• S961L will still apply – this means licensees will still need to “take reasonable steps to ensure financial advisers comply with legal obligations under “good advice” framework

• Onus under the CP falls on the licensee in many cases – what happens if the industry moves to self-registration. It’s important to think ahead when forming your views

• General advice – this is interesting. The CP correctly points out “consumer protection provisions in Division 2 of Part 2 of the ASIC Act are broadly drafted… if (an) advertisement or seminar included a misleading or deceptive representation, the financial services provider would breach the ASIC Act. The obligation for a financial services provider to ‘do all things necessary to ensure that financial services covered by the licence are provided efficiently, honestly and fairly’ in paragraph 912A(1)(a) of the Corporations Act also has a broad reach and may also be relevant.”

Further if general advice is no longer a regulated financial service “… (it) nevertheless (will) have obligations under the Competition and Consumer Act, in particular not to engage in misleading or deceptive conduct.”

• SOAs – it may be that the future of the SOA may look strikingly familiar. Likely more streamlined and digestible, and still containing a record of the advice provided.

• FSGs on the website – efficient, yes; good for the client – maybe not, unless there is a requirement to ensure the client has been explained the FSG (at least verbally) before commencing with the advice process.

• “Must keep complete records” – anyone remember Standard 8 of the Code of Ethics, or s912G(4) of the Corps Act?

• Industry participants should take this opportunity to put their views forward – answer the 15 questions (or as many are relevant for you) in Attachment B.

View the Consutlation Paper at https://treasury.gov.au/consultation/c2022-307409

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