QAR ends not with a bang but a whimper

After laying out its "roadmap for financial advice reform" back in June, the Government has finally released draft legislation giving effect to the recommendations made by Michelle Levy in the Quality of Advice review.

Well – some of them, anyway. The first tranche of reforms (broadly) adopts four of Levy's 13 recommendations. These are:

• clarifying how and when super fund trustees can charge members for advice (and what the associated tax consequences are) 
  
  
• consolidating ongoing fee consent documentation into a single document 
  
  
• allowing for multiple ways to provide FSGs, including by making the FSG publicly available on your website
  
  
• removing monetary or non-monetary benefits provided by a client from the definition of conflicted remuneration (as well as requiring written consent from consumers before they purchase an insurance product that will result in a commission payment)  
  
  

While the Government's initial QAR response made clear that Levy's most significant (and controversial) recommendations had been relegated to an exploratory "third stream" somewhere down the track, few could have predicted just how slender the first chapter of the QAR rollout would end up being. Some notable omissions include axing the safe harbour steps from the best interests duty and allowing advisers to provide streamlined, accessible advice documentation in lieu of a gargantuan SOA.

The new agenda

Respectively, these now-excluded measures were derived from recommendations 5 and 9 of Levy's final report. Both of these changes were originally part of the first "stream" of reforms, aimed at "removing onerous red tape that adds to the cost of advice with no benefit to consumers." 

So: what happened? Did SOA requirements become less onerous over the past five months? Was a hidden consumer benefit unearthed beneath the safe harbour steps over the intervening period? 

Based on Jones' statement, these questions will have to wait until 2024.

Curiously, though, the first recommendation included in the draft legislation – the one concerning super funds charging members for advice – was originally slated for the second stream of the Delivering Better Financial Outcomes package. As it's now been upgraded to first tranche status, one wonders why it's taken priority over the "cutting red tape" measures mentioned above. 

Tough crowd

So far, responses to the draft legislation have been mixed at best. While FAAA CEO Sarah Abood welcomed the changes to commissions disclosure and ongoing fee consent rules, she said the association was "concerned that the rationalisation of Statements of Advice and the removal of safe harbour steps from the best interests duty have not been included in the draft legislation at this time."

She continued: "These are important elements in cutting unnecessary red tape and have the potential to meaningfully reduce the cost of providing advice. We will be seeking further clarification from the Government on the timeframe for these measures."

FSC CEO Blake Briggs was similarly lukewarm in his response, initially describing the first tranche as "modest but important" and later a "missed opportunity". He argued that including the safe harbour steps and SOA recommendations would have "[achieved] the most in reducing the regulatory cost burden on financial advice." 

Obviously, we don't yet have a full picture of the Government's QAR implementation plan, or even what the draft legislation will look like once consultation closes. But given how wide-reaching the review was, it's surprising that the first actual policy proposals arising from it are so limited in scope. 

In his statement, Jones said the Government will announce its final position on the outstanding QAR recommendations by the end of 2023 – a promise that, if upheld, will mark roughly one year since the release of Levy's final report. After all this time, did you expect a bigger bang?