Midwinter believes the proposed reforms will drive innovation to demonstrate the quality of advice, as well as increase the scale and reach of advice services, lending to improved market competition.
The Quality of Advice Review proposes reforms to simplify the regulatory framework to better enable the provision of high quality, accessible and affordable financial advice for retail clients.
As outlined in our submission* to the Quality of Advice Review Proposals Paper consultation, we believe the proposed shift to regulate the outcome of advice rather than the process, with a focus on providing ‘good advice,’ is a more effective way to serve consumer needs and will facilitate innovation around how advice is provided. Technology will be pivotal to enabling this innovation and achieving the objectives of this review – to better enable the provision of high quality, accessible, and affordable financial advice – as well as supporting the health of the financial advice profession.
We support the removal of general advice and agree that individuals and organisations providing financial advice should do so within a suitable regulatory framework. Any information that falls outside this framework (a broadened definition of personal advice) does not need to be regulated, as doing so creates unnecessary risk for organisations, and a barrier to useful information and guidance for consumers.
In addition, we agree that the current SOA is a burden to advice providers, and it is questionable that it provides much, if any, value to consumers. We welcome the proposal to remove the requirement to provide an SOA and allow advisers to provide advice in the way that best suits their customers. However, we believe consumers will still want – and need – to be provided with an artefact, as a record of their engagement with a financial adviser, with the primary objective being to inform and explain the advice provided and demonstrate its value. Enabling advice providers to issue this information in a more user-friendly manner will support efficiency in demonstrating and recording the provision of good advice, leading to a better and more informative experience for consumers.
We see the shift to focus on consumer outcomes as a positive way forward for the industry, but only if advice providers are confident that they can invest in the innovation to provide ‘good advice’ rather than risk mitigation and compliance. This will reduce the need for RegTech solutions to manage complicated processes and open a path for increased innovation and differentiation around advice provision and the consumer experience.
The review has been deliberate around encompassing all advice providers. Broadening the scope of organisations that can provide advice is an opportunity to fill the consumer advice gap.
If the proposed reforms pass, superannuation funds, banks, other financial product providers and new entrants have an opportunity to become key players in the provision of financial advice. This will only work if these organisations have confidence that they can invest in and manage the risks inherent in providing personal advice.
Should these organisations enter (or re-enter) advice – which will become more viable if the proposed reforms move forward – there is an opportunity for relevant providers to differentiate from non-relevant providers through market forces as opposed to regulation. This may be analogous with the independent financial adviser segment in the US that have fiduciary obligations to the client.
Midwinter believes that if the proposed changes pass, advice businesses will need to innovate and may need to accept additional business risk to be competitive. Pleasingly, the proposed reforms will support increased digitisation in the advice profession. Midwinter has already built and is continuing to develop new digital client facing technology that will support consumer engagement and ‘good advice’ outcomes through access, transparency, education, and increased adviser efficiency.
The future of the advice profession is a hybrid model, combining digital and adviser-led interactions. Digital technology will provide advice for simple consumer needs and support interactions with professional advisers. All advice providers could benefit from a single advice engine that can service all types of advice and channels including general information, self-directed, intra-fund, and comprehensive advice, leveraging efficiency and risk reduction from common components which can be tailored to different audiences or individual situations.
You can find out more about the Quality of Advice Review, on the Treasury website.
*Midwinter Financial Services Pty Ltd (Midwinter) is wholly owned by Bravura Solutions Limited (Bravura), a provider of wealth management software solutions in Australia, including in the areas of superannuation, advice, and customer engagement. Midwinter’s submission to the Quality of Advice Review Proposals Paper consultation was made as part of Bravura. You can download Bravura’s official positioning statement on the Quality of Advice Review Proposals Paper here.