Streamlining personal financial advice: Insights from new private bill

November 22, 2024

Overview

On 4 November 2024, the Corporations Amendment (Streamlining Advice Process) Bill 2024 (Cth) (Bill) was introduced and read a first time in the House of Representatives. The privately introduced Bill seeks to completely reform (and simplify) the current disclosure required when providing personal financial product advice to a retail client.

Word of caution, privately introduced bills are rarely successful. For context, none of the 165 private members' bills introduced in the most recent Parliament were passed with only 15 successful private members' bills in the past 35 years.

Context

The proposed Bill was introduced to address and build upon Michelle Levy's 2022 Quality of Advice Review (Review) which sought to address the complex nature of the regulatory framework and to 'ensure Australians have access to high quality, accessible and affordable financial advice'. The Bill specifically addresses 'Recommendation 9 - Statement of Advice' and 'Recommendation 4 - Good Advice Duty'.

Since the final report of the Review (8 February 2023), only two amendments to legislation have been made, addressing less than a quarter of the recommendations.

Proposed changes

The Bill proposes to repeal the entire subdivision relating to the required disclosure attached to the provision of personal advice, which is often considered burdensome, overly complex and often lengthy (in the form of a Statement of Advice or SOA).

It seeks to improve and streamline this process by simplifying the engagement into three broad requirements:

1. Letters of engagement. The Bill proposes a clear and concise letter of engagement before any financial advice is provided (or any further financial service arising out of, or connected with, the advice). This is to ensure there is a consistent, transparent and clearly defined agreement in place between the advice provider and client.
2. Record of advice. A record of advice (ROA) is a simplified version of the longer Statement of Advice. The Bill proposes to only require a record of advice to be prepared, provided and held. It will need to include key messaging from the Review, including:
   1. why the advice is being provided;
   2. what recommended strategy has been outlined; and
   3. how the advice is directly relevant to the agreed scope of advice.
3. Conflicts of interest. The ROA will need to further include information about conflicts of interest such as remuneration, commission, associations, benefits, relationships or other interests that might reasonably be expected to be or have been capable of influencing the adviser in providing the advice.

It is envisaged that these changes (should they be implemented) will minimise unnecessary repetition and complexity and remove the need for advisers to prepare documents that are rarely read by clients, thereby reducing additional administrative work for financial advisers, and ultimately decreasing costs of advice for clients.

Next steps

This Bill is yet to be passed by both Houses of Parliament, and being a private bill this remains unlikely. However, it may prompt Treasury to start to address some of the recommendations that remain unaddressed, in particular the complex disclosure necessitated by personal advice.

Please contact our team if you have any queries regarding any of the above.