Draft Legislation: What the Latest Financial Advice Reforms Mean for Advisers

The Government has released draft legislation aimed at improving access to affordable and quality financial advice. These reforms, now open for consultation, form the next stage of regulatory adjustments designed to enhance the financial advice landscape. However, with an upcoming election, some of these proposed changes may be impacted depending on the results.

Key Components of the Draft Legislation

Advice Through Superannuation

One of the significant elements of the draft legislation is allowing superannuation trustees to provide financial advice to members under specific conditions. This change aims to give members better access to financial guidance within the super system while ensuring key protections remain in place:

• Advice fees can only be charged with explicit member consent.

• Trustees must adhere to their fiduciary duty to act in the best financial interests of beneficiaries.

• The scope of advice provided will be carefully regulated to maintain consumer protections and prevent conflicts of interest.

  
  

Targeted Prompts for Superannuation Members

The reforms introduce targeted superannuation prompts designed to help members make informed financial decisions. These changes seek to provide proactive engagement by:

• Defining what constitutes superannuation-related advice and ensuring it aligns with existing regulations.

• Implementing record-keeping and monitoring obligations for these prompts to maintain compliance.

• Encouraging funds to provide guidance that is timely and relevant to member circumstances.

  
  

Client Advice Records (CAR)

A major shift in documentation requirements is the proposed replacement of the traditional Statement of Advice (SoA) with a simplified Client Advice Record (CAR). This change is intended to reduce the regulatory burden on financial advisers while maintaining transparency and clarity for clients. The CAR will:

• Clearly feature the words 'Client Advice Record' to differentiate it from other documentation.

• Outline the scope of advice, the advice given, and the reasoning behind the recommendations.

• Include details on the cost of advice and any benefits received by the adviser or firm.

• Provide the name and contact details of the entity responsible for the advice.

• Introduce clearer record-keeping requirements, defining circumstances where a CAR is mandatory and outlining any exemptions.

  
  

What This Means for Financial Advisers

These proposed reforms could significantly reshape the way advisers provide and document financial advice. The introduction of Client Advice Records aims to reduce complexity while maintaining robust client protections. Meanwhile, superannuation-related changes present new opportunities for advisers to engage with clients via their super funds, albeit with strict compliance measures.

With the Government inviting industry feedback, now is the time for financial advisers to review the proposals and consider how they may impact business processes and client interactions. Consultation is open until 2 May 2025, and advisers are encouraged to provide input to help shape the final legislative framework.

Next Steps

Advisers should familiarise themselves with the draft legislation and consider participating in the consultation process. As election outcomes may influence the final implementation of these reforms, staying informed and adaptable will be crucial.

For more details and to provide feedback, visit Treasury.gov.au