The Assistant Treasurer has released the final report of the Quality of Advice Review.

The final report contains 22 recommendations. The Government is considering its response.

The purpose of the Quality of Advice Review is ‘to ensure Australians have access to high quality, accessible and affordable financial advice’.

The recommendations include:

• The definition of personal advice in the Corporations Act should be broadened so that all financial product advice will be personal advice if it is given to a client in a personal interaction or personalised communication by a provider of advice who has (or whose related body corporate has) information about the client’s financial situation or one or more of their objectives or needs.
• General advice should continue to be a financial service, but the requirement for a general advice warning to accompany general advice should be removed.
• A person who provides personal advice to a retail client must provide the client with good advice.
• The existing best interests duty and related obligations (the duty to give appropriate advice assuming the best interests duty is satisfied, the duty to warn the client if the advice is based on inadequate or insufficient information and the duty of priority if there is a conflict) should be replaced with a new statutory best interests duty. The new best interests duty will not include a safe harbour.

“Good advice” is defined as meaning “personal advice that is, at the time it is provided:
a) fit for purpose having regard to:
i) if the advice is:
1) given in response to a request, question or inquiry from the client, the purpose of the client that the provider is aware of or should reasonably be aware of; or
2) volunteered by the provider, the reason the provider reasonably considers the advice might be of use or benefit to the client;
ii) the scope, content and nature of the advice; and
iii) the likely relevant circumstances of the client; and
b) in all the circumstances, good.”

The report observes that:

“a duty to give good advice should make it easier for banks, insurers, superannuation fund trustees, and other product issuers, to give simple advice to their customers. This is because there is no prescribed process. The simpler the advice, the simpler the process. It is also because in many cases advice will be able to be provided by a staff member who is not a financial adviser. Again, where advice is simple and follows guidelines provided by the employer, the professional standards that apply to a financial adviser are unnecessary and would only act as an impediment to the accessibility of personal advice. Having said that, the AFS licensee will continue to have an obligation to ensure its staff are appropriately trained, competent and supervised.”

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.