FSC recommends dumping SoA and safe harbour steps in green paper

The Financial Services Council (FSC) has published a green paper, Affordable and accessible advice, with help from Rice Warner and a consumer focus group. The recommendations include no more Statement of Advice (SoA) documents and removing the safe harbour steps, to reduce red tape and improve the affordability of advice.

The FSC wants a simpler financial advice model that is consistent with the new Design and Distribution Obligations (DDO) that require financial product issuers to target consumers specifically.

The FSC’s proposed model categories advice into general information and personal advice, with the latter split into simple personal advice and complex personal advice. The advice provided by superannuation funds and strategic advice falls under simple advice. Complex personal advice is also then broken down further into specialised advice.

The FSC says that most consumers have no idea if they’re receiving personal advice or general advice, which requires a rethink. Most Australians in the focus group thought that simpler definitions were easier to understand, and most thought a redefined model would be an improvement.

The FSC wants to remove the need for an SoA completely, saying they are past their use-by-date. In its place would be a Letter of Advice that is a much shorter, more relevant document outlining strategies and advice.

Advisers are required to follow safe harbour steps, which is a legal process of seven steps. The FSC wants those steps abolished, saying they are irrelevant for simple or low-risk advice (though relevant for comprehensive advice).

The FSC says the code of ethics should be the main source for determining compliance with best interests duties. The overall goal is to lower the cost of providing financial advice and make it easier for consumers to understand, while not eroding the quality of advice or consumer protections.

Consultations are being held on the proposals until July 1.

Download Affordable and Accessible Advice: FSC Green Paper on financial advice (PDF)