Quality of Advice Review
Yesterday, Professional Planner held a webinar with the Quality of Advice Review lead, Michelle Levy. It was a chance for Michelle to discuss the intent of the recent proposals with some industry stakeholders.
Some high level key take-outs from the webinar are as follows:
Best Interest vs Good Advice:
Whilst it is proposed that the 7 steps of Safe Harbour & Best Interest Duty be replaced with an obligation to give good advice, it is important to remember that an adviser still has a Best Interest Duty to their client under the Code of Ethics.
The intent here is to move away from a standardised process-based duty, to a principles based duty. It is up to the adviser (and licensee) to determine whether they have satisfied themselves that the client has received good advice.
SOA's:
Is the SOA dead? One of the major proposals is the abolition of SOA's & ROA's. As an adviser, this is a big change - although it may not be all that it seems.
It is recognised that consumers don't necessarily want to receive advice in writing, and certainly not large advice documents. The intent here is to let the adviser to choose how they deliver their advice to their client - in the form the client wants it. However, again, it is important to remember that the absence of an advice document does not mean you do not need to keep accurate records of your advice, and how you satisfied yourself it was good advice.
For example, initial advice for new client may be in the form of a much shorter advice document/record. With subsequent advice in the form of a file note or email. You will need to keep on file evidence of how your advice was good advice.
Licensees will be crucial here in determining what they require an adviser to demonstrate good advice.
Industry Funds & Digital Advice:
Industry funds and Digital Advice solutions would be able to provide advice, and they would not need to be fully qualified relevant providers (advisers).
Whilst this sounds crazy, the intent here is that the industry funds and digital advice providers would have an extremely limited scope for advice.
It is envisioned that Industry Funds and Digital Advice providers wouldn't compete with advisers. Advisers would hold much more deep relationships with clients and deliver a higher level of professional services.
Fee Disclosure Statements:
The requirement to give an FDS to a client will be removed. A simple annual consent to deduct a fee from a clients account, with an industry standard consent form for all products.
There is a push to get this legislated as a priority. Fingers crossed and watch this space.
Our thoughts:
Demonstrating 'good advice' is obviously very subjective. Accurately capturing your clients goals and objectives will be crucial. Then linking your recommendation back to this objective is the key to demonstrating how your advice was good advice.
You can watch the webinar on the link below: