Proposed changes to the definition of advice and the existing regulatory framework, including measures to streamline client paperwork, are the key thrusts of the Quality of Advice Review final report.

The report, released last week by the Federal Government, sprang no major surprises as Reviewer Michelle Levy stuck mostly to recommendations flagged in consultations last year with industry stakeholders and consumer advocates.

She maintained her recommendations for a broader definition of personal advice; establishing a good advice duty; replacing current provisions around ongoing fee arrangements and consent requirements; doing away with statements of advice; and keeping life commissions.

“The current regulation of financial product advice focuses on providers and not consumers,” the report says.

“There are documents with prescribed content that few people want, warnings that few people understand, and a best interests duty that does not require the provider to give good advice.

“Those who defend the current regime say it is necessary to protect consumers from poor and harmful advice. But the evidence is that it does not do a very good job of that.”

Ms Levy says her proposals will make financial product advice more accessible and more affordable.

“Personal advice will have to be good advice and that means providers will have to ask themselves what their customers and clients want and they will have to consider the purpose of their advice and the relevant needs and circumstances of their customers and clients.

“The recommendations will make it easier for financial advisers to give advice that is truly in their clients’ best interests.”

Ms Levy says she “deliberately chose the term good advice” as the words describe simply, clearly and directly what consumers want and what the law should require.

The Federal Government says it will consult “widely” on the report’s recommendations.

Life insurers and financial advisers have backed the report but Choice and other consumer advocates are against the proposals.

CALI CEO Christine Cupitt says the final report is a crucial step forward in the Australian Government’s work to increase the affordability and accessibility of “high quality” financial advice.

“All Australians can benefit from timely, affordable, and accessible financial advice,” she said.

“The life insurance industry stands ready to work with the Government on significant reforms to ensure consumers can get the right advice, when they need it, including advice about their life insurance needs.”

Ms Cupitt says the peak body – which was created last year to represent life insurers – will participate fully in any further consultation.

MLC Life, a member of CALI, says the final report “acknowledges” that the current framework has made it difficult for many to access and afford quality financial advice.

“Without the timely implementation of the QAR recommendations, the outlook for consumers who need life insurance cover under the status quo will continue to be impacted,” MLC Life Insurance MD Kent Griffin said.

Financial planners urged the Government to act “as quickly as possible” on the proposals put up by Ms Levy.

“Ms Levy has consulted widely with advisers as part of her review of the law, and it’s clear she has heard the many concerns expressed,” Financial Planning Association CEO Sarah Abood said.

“She believes, and we agree, that significant changes are needed to the way advice is provided in order to meet the needs of Australian consumers.”

She says the report’s suggestion on simplifying fee arrangements and enabling planners to consult and agree with clients how they would like their advice to be delivered should be taken up.

“We are hopeful that the changes can be finalised after consultation and legislated with a bi-partisan approach,” Ms Abood said.

The Advisers Association CEO Neil Macdonald says the report marks the beginning of a new way forward for the profession.

‘We hope that via consultation with the industry, and collaboration across all stakeholders, the new measures outlined in the report will herald a new dawn of access to good quality, accessible financial advice for consumers,’ he said.

Choice CEO Alan Kirkland says the recommendations are “radical changes that… expose consumers to unacceptable risk”.

Click here for the report.