Liberal MP introduces bill to simplify consultation processes

In Parliament on Monday, Liberal MP Bert van Manen introduced a private bill – the Corporations Amendment (Streamlining the Advice Process) Bill 2024 – saying that “this bill is intended to improve and streamline the financial advice process.”

Speaking in parliament, van Manen said: “As we have seen over the last 16 years, the dramatic increase in red tape and regulation in this sector has meant that advice has become too expensive, too difficult to access and stifled by red tape.”

“We have seen advisers closing their books because they are completely managing their existing client base due to regulatory fees and can no longer take on new clients.”

The purpose of this bill, according to van Manen, is to simplify the process of interaction between a financial adviser and his client, and it does this in two ways.

“First, by creating a requirement to provide a clear and concise commitment letter that will be provided to the client before any financial advice is received. This letter confirms a clear and transparent agreement between the consultant and the client, which clearly outlines the scope of the advice provided,” he said.

“Secondly, this bill removes the requirement to provide an advisory opinion. The reason this is important is because nowadays these are 100 page documents that no one reads.

“The important point in all of this is what advice is provided and how it relates to the scope of advice requested, and that is why in this bill we are replacing the advisory statement with what is called a record of advice.”

The MP explained that the consultation period is already “well understood” in the profession and is the existing position in Corporations Law.

“These changes are designed to ensure that customers are given the advice they are looking for in a clear, concise and easy to understand manner. More importantly, by simplifying the process, the cost and time spent on preparing advisory opinions is expected to be reduced as they are replaced,” van Manen said.

He explained that he does not believe statements of advice (SOAs) should be removed altogether because “I believe that the agreement between the consultant and the client should be in writing.”

“I do not believe that having a verbal understanding or agreement in this area, given the complexity of some of the work done for clients, is a good outcome for both the client and the consultant,” he said.

“These changes also ensure that the advice provided to a client is directly related to the scope of advice requested.”

The bill was supported by shadow financial services minister Luke Howarth, who praised van Manen in parliament and confirmed what he believes is a failure of the Labor Party on the consultation front.

“Labour’s inaction, the Albana government’s inaction on financial advice reform is leaving Australians under-informed and under-insured. It has been 689 days since Michelle Levy handed over her final consultation quality review report to the Albana government,” Howarth said.

“The government has failed advisers by leaving the review’s most important recommendations to cut red tape until the very last minute, including the recommendation to remove advisory opinions.

“Action to reform the cumbersome advice process is long overdue, and these reforms will significantly reduce the time and cost of providing advice.”

According to the explanatory memorandum, the bill builds on Levy’s 2022 Advice Quality Review, specifically Recommendation 9 – Statement on Advice and the Duty to Give Good Advice.

The memo explains that the bill, if enacted into law, would allow for a “clear and concise engagement letter before any financial advice is provided” and would also make it easier to record advice.

“This ensures that there is a clear and transparent agreement in place before any advice is provided, and standardizes the administrative requirements for all types of advice provided,” the explanatory memorandum states.

“The bill also reduces the administrative burden on organizations to provide through a streamlined engagement process for all forms of requested consultation.”

The engagement letter, according to the MM, will outline the scope of advice to “ensure that there is a clear understanding and agreement between the provider and the client regarding the scope of advice to be provided.”

He added that SOAs are “cumbersome, repetitive and rarely read by clients, and their complexity results in significant additional administrative work for financial advisers, resulting in higher advisory costs for clients.”

The bill would replace SOA with a record of advice, which he said would make advice documents easier for clients to understand, as well as reduce the administrative burden on businesses and costs for clients.

“The Bill will introduce a requirement that the ROA must set out why the recommendation is ‘directly relevant’ to the agreed scope of advice requested and the client’s personal circumstances,” the Foreign Secretary said.

“As with the SOA, the ROA is expected to be provided before any recommendations are made.”

Debate was adjourned and the bill will be read a second time at the next meeting.