Sweeping changes to the way financial advice is delivered have been recommended in the final report of a review into financial advice led by Michelle Levy, a partner at law firm Allens.
The 267-page final report of the Quality of Advice Review, released by Financial Services Minister Stephen Jones on Wednesday, recommends super funds be allowed to give a much wider range of financial advice to their members than the limited advice they can give now.
Super funds are currently restricted to giving “general” advice to their members, where the advice can only relate to their existing fund.Credit: Getty.
It recommends that super funds be allowed to provide “personal” advice. They are restricted to giving “general” advice to their members, where the advice can only relate to their existing fund.
Super funds are currently limited to explaining the expected returns and number of negative years for the fund’s various investment options, for example.
But the Review recommends that super funds should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement.
“In doing so, [super funds] will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice.
“Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members,” the Review says.
That includes being able to deduct adviser fees from a member’s super account to an adviser for personal advice provided the member agrees to it.
The federal government is “considering its response” to the 22 recommendations made in the Review, which was established by the previous Coalition government to make advice cheaper and more widely accessible.
The number of financial advisers has halved in recent years. While demand for advice remains strong, with fewer advisers, the cost of advice has increased – making it even more unaffordable for many people.
Michelle Levy’s review of financial advice makes pulls no punches in order to make advice more widely available.Credit:Rhett Wyman
The Review recommends the requirement for advisers to provide a statement of advice, or record of advice, should be replaced with the requirement for providers of personal advice to maintain “complete records” of the advice provided and to provide written advice on request by the client.
Recommendations that would simplify ongoing fee arrangements and enable planners to consult and agree with clients on how they would like their advice to be delivered, have been welcomed by Sarah Abood, chief executive of the Financial Planning Association of Australia.
She says changes will “allow financial planners to speed up the advice process and give consumers more relevant information, also offering the real potential to meaningfully reduce the costs involved in providing advice”.
Chris Brycki, founder of Stockspot, an online investment adviser and fund manager, says the obligations that govern the provision of personal advice were put in place to protect consumers following decades of problems and scandals in financial planning.
“We’re hopeful these recommendations don’t lead to a free-for-all in the personal advice space,” he says.
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