The Australian Labor government will create a new regulation-lite category of ‘qualified advisers’ as part of controversial reforms unwrapped last week.
In what some critics view as a step backwards to the vertically integrated institution-dominated financial advice industry of pre Royal Commission days, banks, insurers, superannuation funds and others will be able to employ advisers under looser regulatory controls than professional counterparts.
Stephen Jones, Australian Minister for Financial Services, said in a speech that the ‘qualified adviser’ class “will fill the advice gap by advising on less complex matters”.
Jones said qualified advisers would “generally be employees of licensed financial institutions”.
“I have often said that the nut to crack on this was to nail the scope, charging and qualifications of this cohort. On scope, qualified advisers will focus on providing simple financial advice,” he told the Australian federal parliament.
“On fees, qualified advisers will be prohibited from charging a fee and from receiving a commission, which will help to restrict their advice to simple advice. And on qualifications, as the name suggests, they will be required to meet a Government-mandated education standard.
“The exact level of education will be determined in time, but a minimum standard of a diploma may be the right balance to be less onerous than the requirements for professional advisers.”
However, Sarah Abood, head of the Financial Advice Association (FAA), told media that the recently merged industry body was “deeply concerned” about the mooted regime change.
“… in this latest proposal, these ‘qualified advisers’ will provide something that passes for advice for free, confusing clients and obscuring the important differences between information from a partly-trained salesperson, and comprehensive financial advice from a fully qualified professional,” Abood said.
The latest plan follows the Quality of Advice Review (QAR) established by the previous Australian government that was charged with resolving the issue of providing affordable financial advice.
QAR lead, Michelle Levy, tabled 20 recommendations’ in her final report this February, many of which have been accepted by both previous and current governments.
As well as creating the ‘qualified adviser’ rank, the Labor proposals, due to be legislated next year, will shake-up the much-maligned ‘best interests’ duty for advisers and do away with complex ‘statements of advice’.
Jones said while Australians “must be protected from bad advice, bad marketing and dud products”, the current onerous regulations have left a vacuum filled by unregulated ‘fin-fluencers’ on online platforms such as TikTok and Reddit.
“This new access to financial advice will reduce the harm caused by scammers posing as ‘fin‑fluencers’, with investment scams representing over 60 per cent of all scam losses so far this year,” Jones said.
The Australian professional advisory industry has seen numbers shrinking in recent years, even prior to the 2018/19 Royal Commission into financial services, with about 16,000 advisers registered at the latest count.