The Minister for Financial Services Stephen Jones has given his clearest indication the future of Statements of Advice is due for reform.
Speaking at the first of three roadshow dates hosted by Professional Planner parent company of Conexus Financial, the Minister said it’s not reasonable to expect consumers to engage with 100-page advice documents.
“On this one it’s a bloody no-brainer,” Jones said. “That may have started with a good intention to ensure that consumers are protected, but are actually a risk mitigation device for the licensee and/or product manufacturers. They’re not doing what they’re intended to do.”
However, Jones ruled out eliminating them outright.
“It is important when somebody is sitting down with a financial planner and gets a piece of advice – comprehensive or otherwise – that they walk away with a bit of paper,” Jones said.
“Even if we said they didn’t have to [give a document outlining the advice given] the overwhelming majority of licensees and financial planners would ensure they did.”
Jones wouldn’t specify what the size of the ideal future SOA should look like, only that the current arrangement is not “fit for purpose”.
“They’re churning up a lot of time and money, and consumers aren’t reading them or understanding them,” Jones said.
The admission comes the week after five consumer groups sent a letter to the Minister stating they had softened their stance towards reforming SOAs and the safe harbour steps of the Best Interests Study.
“We would support reforms to facilitate the provision of shorter, more meaningful information by advisers to their clients,” the letter from Choice and four other consumer groups said.
“We would however oppose the recommendation that advisers no longer be required to provide any record of advice to their clients.”
In the interest of time
Although the Minister made himself available to hear directly from the industry during the roadshow, the consultation on the final report of the Quality of Advice Review is yet to officially open via Treasury.
Despite pressure from the room, the Minister remains uncommitted to a firm timeline of reforms, insisting the changes will first go through cabinet and then be introduced, where necessary, via legislation.
“We are a running a cabinet-style government in which we make a collective decision and then implement it,” Jones said.
“There’s a whole bunch of things we’re dealing with in the next month including the Budget and over the course of this year, but in the middle of all of those things we want to ensure that we make space to start the process of implementing these reviews.”
Anything that can be done with Ministerial discretion can be handled this year, Jones said, but any changes that require legislative change will not be enacted urgently.
“Stuff that requires a significant legislative change or even simple legislative change will have to go through a longer process,” he said.
“Even if the government decided today there was something we all agreed on, given the legislative agenda the government has before us, I would not get a slot in the legislative agenda this year.”
Not a review of the review
Acknowledging criticism of the view his consultation is redundant, given the Quality of Advice Review was meant to be a comprehensive review of the industry, Jones said he wanted to personally engage with the industry.
“There’s been some suggestion by me going out and hosting some conversations in open forums like this that I’m somehow conducting a review on the review on the review,” Jones said.
“It’s an extraordinary set of circumstances where a government minister gets criticized for going out and consulting with people but here we are.”
He added that he’s consulted independently with all the peak associations except from Industry Super Australia, which will also happen.
“I’m committed to proceeding as I started in this job and that is to ensure that I have an open dialogue with the people and stakeholders in the industry,” Jones said.
The aim of the process is to avoid trying and failing to solve the same issue again and again, the Minister said.
“What we have done is solve the same problem about three or four times,” Jones said.
“Some of the chapters in Michelle’s report put a spotlight on that. There is a whole layering of regulation.”