Australia is set to introduce a ‘new class’ of financial advisers akin to the nominated representative regime in NZ in a bid to lower the bar for access to advice.
Under the second tranche of the Delivering Better Financial Outcomes (DBFO) unveiled last week, licensed firms would be able to employ advisers to deliver a narrowly defined range of services.
In a statement, Australian Financial Services Minister, Stephen Jones, said: “The new class of adviser will be restricted to advising only on products issued by prudentially regulated entities and will be prevented from providing advice on more complex and high-risk areas such as establishing a self-managed superannuation fund.
“This will ensure that the new class of adviser provides advice within their expertise and targets the products and advice topics that Australians deal with most.”
Similarly, ‘Class 3’ licensed NZ financial advisory firms can employ nominated representatives to offer limited advice with the entity retaining compliance responsibilities.
Somewhat controversially, the Australian proposals would allow entities such as superannuation funds or banks to bundle advice expenses for the lower-level service into broader operational costs – sparking fears of a reprise of the ‘fees-for-no-service’ scandal that sank the vertically integrated models of incumbents such as several banks and AMP.
But Jones said the new advice model would include strong consumer protections such as a ban on cold-calling.
“The Government anticipates some licensees will choose to indirectly charge for advice offerings,” he said. “However, licensees will now have the option of charging a direct fee for advice provided by the new class of adviser. This will allow a greater range of institutions to employ the new class of adviser, delivering neutrality across different advice models and expanding the supply of quality advice available to consumers. The new class of adviser will not be permitted to charge ongoing fees or receive commissions.”
Unlike fully-fledged professionals in the sector, the lower-ranked advisers would not need degree-equivalent qualifications to operate.
Instead, the new-class advisers would be required to complete a “level 5 diploma, to ensure they have the expertise to provide high-quality simple advice”, according to the Australian Treasury.
The DBFO reforms implement some of the proposals tabled in the Quality of Advice Review in 2022. Headed by lawyer, Michelle Level, the review was charged with finding ways to make financial advice affordable for a wider section of the population.
Advice fees in Australia have soared in recent years, partly on the back of regulations put in place over the last decade or so to stamp out previous consumer-unfriendly practices.
Tranche 1 of the DBFO passed into law earlier this year in changes that allowed super funds to charge advice fees to members from their accounts, removing annual advice fee disclosure obligations and dropping bans on certain conflicted remuneration arrangements.
Jones said the government was “developing exposure draft legislation for public consultation” on Tranche 2.
However, Australians are set to go to the polls by mid-May next year with the fate of some government legislative initiatives doubtful to pass ahead of the poll.