The FAAA is cautiously positive on the government’s announced DBFO Tranche 2 reforms in response to the Quality of Advice review, however CEO Sarah Abood said the final detail will be important.

“We think that these reforms will go some way to getting more financial advice to more people.

“We are looking forward to seeing further detail on how these reforms will work, beyond the high level provided in today’s announcement.

“Nevertheless, it is good to see the government’s announcement addresses a number of the concerns that the FAAA has identified during earlier consultation.

“Key reforms the FAAA is happy to see in Tranche 2 include greater certainty on the provision of scoped advice, removal of the best interest duty safe harbour steps, and simplification of advice documents. These important reforms will help to reduce the cost and complexity of delivering professional financial advice.

“We have also seen some more information in this announcement on the introduction of a new class of adviser, or “NCA” for short”.

Ms Abood said the government’s recognition that the NCA is a pathway to becoming a qualified financial adviser is welcomed.

“It’s extremely important that the education for NCAs can count towards a full financial planning degree, and that the NCAs of today can become the professional financial advisers of the future. Since the banks and other institutions exited financial advice, those traditional training grounds have been lost. With our numbers having halved in the last five years, and only just over 300 new entrants last calendar year, we urgently need to replenish the ranks of professional advisers. We are pleased to see the government’s recognition of the importance of this.”

Ms Abood also welcomed the assurance that financial advice businesses, as well as product issuers, can employ this new class of adviser, and charge one-off or episodic fees. .

“We certainly believe that advice firms should have this option. This provides a more level playing field, enhances competition, and gives consumers more choice in how they access simple advice.

“Quite early in discussions, many members told us they also wanted to be able to appoint these advisers. This could offer a more affordable means of providing simple advice to the children or grandchildren of clients, for example. It is pleasing that the government has recognised this and plans to legislate accordingly.

“The scope of advice for NCAs will be limited to prudentially regulated products, such as insurance and superannuation. We are particularly keen to see how this will play out in relation to retirement advice, and how it will interact with the Sole Purpose Test - we look forward to seeing more detail from the government on this.

“The name of the new class of adviser is not yet settled, and remains an important matter of detail to be finalised. Our position has been that the name should not include the restricted terms “financial adviser” or “financial planner”.

Ms Abood said that while the FAAA is pleased the government is progressing these reforms, and that it is committed to working with the FAAA, there is clearly more work to be done. Delivering on these reforms is critical for Australian consumers, and the sooner they have access to the benefits, the better.

“We encourage the government not to take its foot off the pedal with the pace of reform and to continue its commitment to reduce the regulatory burden of providing advice.

“Implemented correctly, these reforms have the potential to make good on the promises of the Quality of Advice Review and increase access to high quality and more affordable financial advice for more Australians,” Ms Abood said.