The Albanese Government yesterday revealed its financial advice regulation reform package, designed to ensure Australians have access to “quality and affordable financial advice when they need it most”.
The government points to the rise of “fin-fluencers” on social media platforms like TickTok and Reddit in the absence of easily accessible and reliable financial advice, which exposes Australian consumers to unregulated and potentially malicious actors.
The government has proposed a new class of financial advisors to fill this gap, which would be focused on providing fee and commission-free advice on simple matters while still meeting educational standards.
Removing red tape
“The government promised to make financial advice easier to access when Australians need it, and today’s announcement delivers on that commitment,” Assistant Treasurer and Minister for Financial Services Stephen Jon said.
“With five million Aussies at or approaching retirement with more money than ever before, these reforms will help people make informed and safe financial decisions.
“This new access to financial advice will reduce the harm caused by scammers posing as ‘fin‑fluencers’, with investment scams representing over 60% of all scam losses so far this year.
“Access to good advice can be key to helping Australians manage cost of living pressures.”
This new class of “qualified advisors” will apply across all financial institutions, including superannuation, funds, life and general insurers and banks.
The government says the new model will:
- Modernise the best interests duty to ensure customers receive helpful advice, including on single issue or limited scope issues, at a high standard;
- Replace statements of advice with a record that is in plain English and provides helpful information to make an informed decision; and
- Introduce a new class of financial advisers who can provide advice on simple topics, while being subject to the modernised best interests duty
Given the unique obligations on superannuation funds and the need to drive engagement with members, the government has designed this model to also:
- Clarify the topics that superannuation funds can charge for advice on and the circumstances they can consider; and
- Allow super funds to provide helpful 'nudges' to members to drive greater engagement with superannuation at key life stages.
The legislation to implement these new reforms will be finalised next year when parliament resumes.
COTA welcomes financial advice reform
The Council on the Ageing Australia has lauded the Federal Government’s proposed reforms, describing them as a sign of the government's commitment to “ensuring consumers – including older people – are given the best possible financial advice”.
“Many of these changes are simply common sense and will help ensure better outcomes for customers,” COTA Australia CEO Patricia Sparrow said.
“The ability for superannuation funds to now consider someone’s personal and household circumstances, such as debt, their spouse’s income and their age pension eligibility will go some way to ensuring people can get the right advice for them.
“It doesn’t matter if you’re 18 or 80, working out the best financial systems and set-ups can be daunting.”
Sparrow points out that while it’s critical to have safeguards in place to protect people against bad advice, the ability to seek out quality advice is just as important.
“Giving older people, and indeed people of all ages, the ability to get good, affordable and clear advice on matters financial will hopefully help ensure we have the best chance of making good financial choices,” she continued.
“These reforms complement the Government's objective to improve our superannuation scheme so that everyone has a chance at the dignified retirement we all deserve.
“The Assistant Treasurer and Minister for Financial Services Stephen Jones said he expected superannuation funds to provide more information and advice and COTA couldn’t agree more with those expectations.
“Superannuation is a key pillar of retirement and strengthening the system so that it works for everyone is crucial.”