Treasury unveils tranche two reforms: advancing the Quality of Advice Review

Treasury has released for consultation its draft legislation for the second tranche of the Government's financial advice reforms. This forms part of the Government's broader reforms based on "Delivering Better Financial Outcomes" which includes the implementation of aspects from the recent Quality of Advice Review recommendations.

The key areas of proposed reform in the second tranche include:

Replacing the Statement of Advice (SOA) with a more fit-for-purpose Client Advice Record (CAR)

The proposed reform replaces the current SOA requirements with a principles-based, technologically-neutral record that is in plain English and is designed to support clients in making an informed decision about the relevant advice. Under the proposed reforms to introduce the CAR, licensees and authorised representatives need not disclose their compliance with legislative requirements to the client, unless requested. This demonstrates a shift from the current SOA regime which ordinarily contains information about both record-keeping and proof of compliance. The key intention is ultimately to reduce the cost of providing client advice (which will have the effect of making advice more accessible) while simultaneously ensuring clients receive helpful and accessible information.

Provide clear rules on what advice topics can be collectively charged for via superannuation

In response to recommendation 6 of the Quality of Advice Review, this proposed reform provides a framework to provide guidance to superannuation trustees about when advice is or is not taken to relate to a financial product that is a beneficial interest in the superannuation fund. This works in conjunction with the expectation that trustees use their own judgment when collectively charging for personal advice and adhering to the current prohibition under section 99F of the Superannuation Industry (Supervision) Act 1993. The policy intention for this proposed reform is to allow superannuation funds greater flexibility to provide their members with simple and cost-effective advice about retirement. Further, advice that is provided under circumstances prescribed by the relevant regulations is taken to be related to a financial product that is beneficial interest in the superannuation, meaning trustees can collectively charge for the provision of such advice, contingent on meeting their other relevant requirements (for example, the best financial interests duty).

Additional proposed amendments also include allowing trustees of MySuper products to charge advice fees in accordance with arrangements between members and third parties or in line with the terms of written request or written consent of the member. The proposal aligns the definition of advice fee in relation to MySuper products with the MySuper charging rules and requirements for member-deducted advice.

Allow superannuation funds to provide targeted prompts to members to drive greater engagement with superannuation at key life stages

The proposed reform creates a framework for trustees of certain superannuation funds to send targeted superannuation prompts to members. It is designed to allow superannuation funds to deliver prompts that are targeted to groups of members and is intended to facilitate meaningful communication between superannuation funds and their members to encourage members to engage with their superannuation at, or near, key decision points. This signals a legal shift from the current generic information commonly provided by trustees and will facilitate trustees taking a more targeted approach via prompts to members.