Christmas has come early for the bank’s shareholders with the decision to slightly increase the 2024 dividend – despite a single-digit decline in the net profit and cash earnings.
Beating the market benchmark is never easy, with 72 per cent of Australian actively managed global equity general funds trailing the S&P World Index in the six months to June 30, 2024. Domestic equity funds performed slightly better, albeit against a significantly lower bar set by the S&P/ASX 200 Index.
Financial advice to be radically changed in Treasury proposal
Quality of Advice Review chairwoman Michelle Levy has paved the way for a significantly lighter regulatory environment for advisers that will dispense with many of the parameters set in place over the last decade.
Levy (pictured) and Treasury released a Proposals for reform consultation paper Monday afternoon that proposed getting rid of best interest duty in favour of a stripped-down “good advice” duty for advisers.
“In my view a more direct and better way to regulate the provision of advice is to start precisely where the current regime does not – with the content of the advice,” Levy stated in the paper. “Consumers want good advice – not documents and processes.”
Most documentation key to the delivery of advice will also be abolished according to the draft, including statements of advice (SoAs) and records of advice (RoA).
Advisers would instead keep records of advice, to be handed to clients upon request.
“SOAs have been universally criticised as adding to the cost of providing advice,” the draft paper outlined.
“Providers of personal advice should be able to determine what form of advice would best suit their clients. Providers should be required to maintain complete records of the advice they provide and to provide a written record of advice to a client on request. This would replace the current requirement for advisers to provide a statement of advice or record of advice.”
Fee renewal documents would also go, as would consent forms to deduct advice fees from products like funds and platforms. Both would be combined into one consent form, which may stop multiple providers demanding advisers have clients sign separate, distinct renewal forms.
The paper avoided insurance advice, which means the sector will need to wait until December to ascertain the fate of insurance advice commissions.
Major pullback
The Levy plan is a sharp detour after a decade spent adding layers to the financial advice compliance regime, which has seen the cost to provide advice increase 40 per cent between 2019 and 2022 according to Adviser Ratings.
While the cost to serve has gone up, the quantum of advisers operating has declined from 30,000 in 2018 – a number somewhat inflated by a quirk of the adviser education standards – to around 15,000 today.
The review, originally proposed by Hayne in the final report of the royal commission, had its initial focus shifted from ensuring advice quality (post the implementation of his reforms) to increasing access to advice when ex-financial services minister Jane Hume announced ASIC’s Promoting access to affordable advice for consumers project was being folded into it.
Since then, the implementation of further Hayne reforms – such as annual consent and fee disclosure statements – have increased the cost to serve further and exacerbated the access issue.
The measures outlined in the draft response, however, pull much further back on regulation than most expected. A joint submission to the review from the Financial Planning Association, the Association of Financial Advisers, the Financial Services Council and others, for example, only asked for greater use of RoAs in place of SoAs.
No more general advice
The proposed “good advice” mandate not only replaces several existing duties, but would also probably open the door for banks to re-enter the advice space leveraging technology.
The term ‘general advice’ would be abolished according to the interim report, which proposes allowing the delivery of “simple” advice to consumers by unlicensed providers that could include banks and insurers.
“The obligation to provide good advice would apply whether the advice is provided by an individual, an algorithm or a digital advice service,” the report stated.
“It would also apply whether the advice is provided by an employee of a bank, insurer or superannuation fund or a professional financial adviser.”
‘Sensible roadmap’
The proposed loosening of regulatory standards also leaves open the possibility that egregious financial harm to consumers could creep its way back into financial advice.
“I do not hold that view,” stated Levy in the paper’s introduction. The “good advice” provision, she explained, together with the existing laws – including the adviser education standards and the Code of Ethics – provide the required consumer protections.
“The proposals are intended to make it easier for consumers to get personal advice,” she continued. “Therefore, they are also intended to make it easier for providers of financial advice… In my view this greater ease is achieved without introducing a corresponding risk of harm to consumers.”
Industry representative groups largely welcomed the paper, with the FSC calling it a “sensible roadmap” and the joint association group predicting it will help consumers have “meaningful, fit-for-purpose conversations with their advice provider”.
The consultation period for the proposal papers will close on September this year.
