QAR reforms commence with a whimper, hoping for a bang with the next tranche

• Treasury has released draft legislation for the first tranche of ‘Quality of Advice Review’ reforms – ‘Stream One’.
• The legislation focuses on quick wins and obvious streamlining.
• But it leaves on the shelf for now the major recommendations of the 'Levy Report', leaving the advice community underwhelmed.
• Assistant Treasurer and Financial Services Minister Stephen Jones assures us there is more to come.

Mackay Chapman was present at the FAAA Congress 2023 on 22 November 2023 where Assistant Treasurer and Financial Services Minister Stephen Jones addressed the underwhelming reforms proposed by the ‘Stream One’ reforms under the ‘Quality of Advice Review’ (QAR) – for which draft legislation has now been released.

The Stream One QAR reforms do not address some of the biggest roadblocks to the efficient provision of financial advice and improving the quality and delivery of that advice – in particular, the requirements for Statements of Advice and the removal of safe harbour steps from the Best Interest Duty.

It was acknowledged by Michelle Levy in her QAR Report, which gave rise to the QAR reforms, that rules that were intended to protect consumers have instead become unnecessary, and are being used in some cases to protect advisers from legal claims, contrary to their intended purpose – a fact recognised by the Assistant Treasurer at the FAAA Congress.

There are some ‘quick wins’ in the Stream One reforms – in particular streamlining fee consents into one document (instead of multiple documents in many different forms). But the material reforms that will have an impact on providing cheaper and more effective financial advice to Australian customers are yet to come.

The Assistant Treasurer made it clear that the reforms proposed by Stream One are just the first tranche of financial advice legislation and which could be legislated immediately.  Knee-jerk changes to financial advice regulation have led to today’s unsatisfactory suite of laws – the current Government does not want to repeat those mistakes and will be consulting with the industry to bring in the next tranche of reforms, and the Assistant Treasurer sees those changes on the horizon.  While many in the advice community will be frustrated at having to wait longer for reforms around statements of advice and removal of Best Interests Duty safe harbour steps, the government should be given some credit for focusing on getting reform right.  While Stream One may be a bit underwhelming, we await Stream Two with bated breath.