The practical impact of the QAR recommendations on advisers

19 min read
17/02/23 17:00

The Quality Advice Review was not about advisers but consumers with the overarching remit of making advice affordable, respectable and of value.

Do the recommendations achieve this? Yes … and no. Financial advice delivered by a professional adviser will remain out of reach for many as it is often about a range of topics, complex issues and objectives that involve a number of recommendations and ongoing advice assistance over many years. But the QAR recognises that many consumers do not need traditional financial advice – they simply need assistance with point in time topic advice. And it is on this point that the QAR seeks to change the landscape. The recommendations do this by changing the definition of personal advice, general advice, and creating a new role for non-relevant providers.

For limited authorised reps, if the recommendations are enacted, the advice process should be smoother with less compliance and fall into a pattern not dissimilar to how other forms of advice are delivered now inside accounting practices. For accountants who are not authorised, there is no carve out and the broadening of the definition of personal advice is likely to mean that there is no wiggle room. 

The highlights, for those wanting to skip ahead, are:

  • Broader definition of personal advice to prevent general advice and disclaimers being used to provide personal advice by stealth (1& 2)
  • Removal of the requirement for general advice disclaimers because of the point above (2) 
  • Introduction of the concept of a non-relevant provider to enable employees to provide product advice if the employee is not receiving payment or a commission for the advice (will apply predominantly to product providers comfortable taking responsibility for these staff) (3)
  • Introduction of a “good advice” requirement and a statutory fiduciary best interests duty, aligning the Corporations Act to the Code of Ethics. Will impact predominantly on product providers utilising non-relevant providers because the responsibility rests with the AFSL and their Directors not the employee. For financial advisers, they are already focussed on the client not product outcomes. However, safe harbour for best interests duty would be removed with the focus on the merit of the advice not the process (4,5)
  • Removal of the requirement for SOAs and ROAs but don’t get too excited, the requirements on advisers to prove informed consent and compliance with the Code of Ethics remains. Your notes and interactions will be incredibly important and AFSLs will need to grapple with what this means. (9)
  • Advisers will still need client consent annually for ongoing fees and the services to be provided for the next 12 months but reduces the complexity of working with product providers by introducing a standardised ongoing fee form. 
  • Keep insurance commissions with disclosure requirements (13.7, 13.8, 13.9)

To date, the Government has given no indication if or when they will legislate the recommendations in part or in full and have stated that they will now “consult widely on the Review’s recommendations”. We have given our view on the likelihood of each recommendation seeing the light of day using a traffic light - green for likely, amber if the recommendation is likely to change, and red where there are significant problems either at a technical or political level (or both).

"And if you want to be *really* sure that the Minister doesn't accept it, you must say the decision is "courageous" 
Bernard Woolley : And that's worse than "controversial"?  
Sir Humphrey Appleby : Oh, yes! "Controversial" only means "this will lose you votes". " 
Yes Minister


Let’s take a look at the recommendations, how we believe they will apply in practice, and the likely practical impact on financial advisers:


Traffic light: Green 

Recommendation 1 – Personal advice 

The definition of personal advice in the Corporations Act should be broadened so that all financial product advice will be personal advice if it is given to a client in a personal interaction or personalised communication by a provider of advice who has (or whose related body corporate has) information about the client’s financial situation or one or more of their objectives or needs. 

Personal advice means financial product advice prepared or adjusted for or directed to a particular client in circumstances where: 

a) the client tells the provider of the advice their financial situation or one or more of their objectives or needs; or 

b) the licensee responsible for the advice, or a related entity of the licensee, if the licensee is a body corporate, holds information about the client’s financial situation or one or more of their objectives or needs.  

Impact on advisers

This recommendation broadens the definition of what constitutes personal financial advice removing ambiguity to prevent providers ‘gaming’ the system by delivering personal advice under the banner of general advice with substantial disclaimers. It is squarely aimed at entities that deliver a ‘general advice only’ model.

An upside is that it would have the effect of freeing up advisers to provide topic by topic advice if they chose to pursue a transactional client model.

Under this recommendation, if you hold personal information on a client about their ‘financial situation’, then your communication is likely to fall within the definition of personal advice. 

The QAR cites:

  • The Conexus Institute study that found 40% of consumers wanted advice on a topic-by-topic basis, while 35% wanted a comprehensive plan which was reviewed from time to time. A smaller proportion (22%) wanted a comprehensive plan that they could follow for the next few years; and
  • 2021 research by Investment Trends that found that 11% of consumers wanted comprehensive advice, while 38% wanted limited advice, with 50% indicating that they wanted to look for information themselves.

The final report makes three very important observations that have, in their view, limited access to affordable quality advice:

  1. the division of financial product advice into general advice and personal advice 
  2. the large gap between the obligations applying to a person who provides general advice on the one hand and the obligations applying to a person who provides personal advice on the other; and
  3. the inflexibility and, in some cases, unsuitability of the obligations applying to a person who provides personal advice.

The reality is often financial institutions have relevant financial information about their customers. The report is recommending that financial institutions be encouraged to provide advice as it is in their interests to do so, but not via the use scripted responses and general advice disclaimers.


Traffic light: Amber

Recommendation 2 – General advice 

General advice should continue to be a financial service, but the requirement for a general advice warning to accompany general advice should be removed.

Impact on advisers

The inference from the final report is that given the exemption to what constitutes personal financial advice, it should be obvious when personal financial advice is not being provided, and therefore a disclaimer should not be required.

The requirement to have an AFS licence when providing general advice will remain in place. Instead of a requirement, warnings and disclaimers will become the responsibility of the entity providing the general advice under general principles. We can’t see any adviser not providing a disclaimer when delivering say a seminar! 


Traffic light: Amber 

Recommendation 3 – Relevant providers

Amend the Corporations Act to provide that personal advice must be provided by a relevant provider where: 

  1. the provider is an individual; and
  2. either: 
    1. the client pays a fee for the advice; or
    2. the issuer of the product pays a commission for the sale of the product to which the personal advice relates. 

In all other cases, personal advice can be provided by a person who is not a relevant provider.

Impact on advisers

This recommendation simply states if you are getting paid a fee or commission, you need to be a relevant provider. This recommendation does not change what is required from current relevant providers, including complying with regulations, general law, and the Code of Ethics.

However, the concept of a non-relevant provider is new. This definition is likely to apply to employees of product providers who are not generating a fee or commission. For example, an employee of a superannuation product provider could provide advice to a member about transition to retirement or downsizer. 

Despite what some groups are saying, this distinction will not represent a return to the bad old days of financial advice.  In fact, the contrary may occur. 

A product provider must obtain an AFS licence to provide financial advice. Importantly, if they hold financial information about their customer, they must provide personal financial advice NOT general advice or refer the customer to a relevant provider. Finally, based on feedback from industry to the interim report the final report recommended retaining the requirement to hold an AFS license to provide general advice.  As a result, a product issuer who wants to facilitate sales of their product must by law comply with section 912A of the Corporations Act to do all things necessary to operate efficiently, honestly and fairly. 

This is significant because in March of 2019, this section of the Act was weaponised based on recommendation from the Royal Commission, due to multiple breaches of s912A by institutions. Consequently, the maximum civil penalty for breaching s912A was raised to $555 million but more importantly individuals will also be held liable (subject to civil penalties) if involved in a contravention. 

The simple point is institutions will no longer be able to game the system and provide general advice.  Plus, individuals such as directors or officers of a product provider (the decision makers) run significant personal financial risks in doing so. This recommendation relies on the law to act as gatekeeper of good behaviour and prevent Royal Commission style scenarios occurring again. 

Finally, for AFS licenses who have been set up specifically to provide general advice, this recommendation may require a rethink of the services they provide.  It may well mean that they will no longer be able to provide general advice. For existing relevant providers this recommendation should pose no issues.


Traffic Light: Amber

Recommendation 4 – Good Advice Duty

A person who provides personal advice to a retail client must provide the client with good advice. Good advice means personal advice that is, at the time it is provided: 

a) fit for purpose having regard to: 

i) if the advice is: 

  • given in response to a request, question or inquiry from the client, the purpose of the client that the provider is aware of or should reasonably be aware of; or
  • volunteered by the provider, the reason the provider reasonably considers the advice might be of use or benefit to the client;

ii) the scope, content and nature of the advice; and 

iii) the likely relevant circumstances of the client; and

b) in all the circumstances, good.

If the advice is provided by a financial adviser (relevant provider), this duty applies to the financial adviser. In all other cases, this duty applies to the AFS licensee.

Impact on advisers

The final report comments on a number of occasions where current regulation focuses on the adviser’s actions, that is the process not the outcome or the merits of the advice provided. The argument of the final report is that good advice duty is written and defined with the client in mind. The Code of the Ethics is also drafted with the outcome in mind and therefore the final report recommending a “good advice duty” poses no contradictions to what relevant providers do now.

Following on from Recommendation 3, this recommendation recognises an import issue for employees of institutions who provide advice, for example superannuation funds. Relevant providers are required to comply with regulations, general law and the Code of Ethics. They are potentially individually liable for breaches of parts of the Corporations Act, general law and the Code of Ethics. The problem faced by an employee who is also a relevant provider is they also serve the interests of their employer. In recognition of this conflict, employees would be recognised as non-relevant providers. As a result, the recommendation is that the good advice duty will rest entirely with the AFS license.


Traffic Light: Amber

Recommendation 5 – Statutory Best Interests Duty

The existing best interests duty and related obligations (the duty to give appropriate advice assuming the best interests duty is satisfied, the duty to warn the client if the advice is based on inadequate or insufficient information and the duty of priority if there is a conflict) should be replaced with a new statutory best interests duty. 

The new best interests duty would be a true fiduciary duty that reflects the general law and will not include a safe harbour.

This duty will apply only to financial advisers who are relevant providers.

Impact on advisers

This recommendation represents a significant change for the industry but will not adversely impact relevant providers as they are required to apply the Code of Ethics requirements. At present there is a difference between the Code and statutory law.

The interim report recommended a repeal of s961B Best Interest Duty and Safe Harbour. However, the final report recommended a significant strengthening by replacing best interest duty with a duty to act in the best interest of the client and removal of s961J duty of priority. If implemented, this recommendation codifies a fiduciary duty in the Corporations Act, that is a duty to act in the clients’ best interests. 

Critics of this recommendation state that any changes to current best interests’ duty in the Corporation’s Act will be a retrograde step. But this is not the case. It is in fact a significant strengthening of regulation by requiring relevant providers to be a true fiduciary’s which is a higher standard of duty of care governed by the ‘no profit, no conflict’ rule. 

Importantly, the final report highlighted that relevant providers are already required to act as a fiduciary due to the Code of Ethics. This recommendation resolves the conflict between the Corporations Act and the Code of Ethics.  However, in the final report Michelle Levy was critical of the drafting of the Code of Ethics which ultimately persuaded her to retain in the Corporations Act a duty for a relevant provider to act in the best interests of their client. 

The final report also acknowledges the conflict of interest that occurs between an institution and their employees. This is one of the important reasons the category of non-relevant provider has been recommended. It is impossible for an employee of an institution to provide personal financial advice in the same way as relevant provider who is a fiduciary. This is simply because an employee cannot serve two masters i.e., their employer and their client.

While this recommendation invites criticism, remember that conflict of interest was not dealt with via the FoFA reforms as clearly evidenced by the Royal Commission. Creating non-relevant providers is a recognition of the obvious conflicts that can lead to moral hazards that harm consumers. The final report has addressed this situation by placing all responsibility for the provision of personal advice on the AFS licence when they employ non-relevant providers. 

For relevant providers, this does not represent a significant change as it aligns the Corporations Act with the Code of Ethics. It will be a challenge for product providers who employ financial advisers as the recommendation clearly aligns responsibility with the AFS license. Some may choose to employ relevant providers who possess the same qualifications and experience as current relevant providers. This will be based on the nature, scale and complexity of the advice and services they provide. Or, they may be forced to choose to refer to a third party relevant provider. 


Traffic Light - Green

Recommendation 6 – Superannuation advice

Superannuation fund trustees should be able to provide personal advice to their members about their interests in the fund, including when they are transitioning to retirement. In doing so, trustees will be required to take into account the member’s personal circumstances, including their family situation and social security entitlements if that is relevant to the advice.

Superannuation fund trustees should have the power to decide how to charge members for personal advice they provide to members and the restrictions on collective charging of fees should be removed.

Recommendation 7 – Deduction of adviser fees from superannuation

Superannuation trustees should be able to pay a fee from a member’s superannuation account to an adviser for personal advice provided to the member about the member’s interest in the fund on the direction of the member.

Impact on advisers

Gives trustees the power to decide how to pay the fees for financial advice – upfront or through the fund. 

The final report is not recommending expanding intra-fund advice. However, it did express the view that it is in the interest of superannuation fund members to be able to get good advice from their fund. That is, satisfy the good advice duty. 

Micelle Levy was concerned that Section 99F of the SIS Act was poorly drafted as it does not give permission to use fund assets to provide advice and does not set boundaries on advice to be provided.  The objective of the recommendation is to give trustees greater confidence about the scope of advice and how to allocate cost of advice between members.


Traffic Light: Green

Recommendation 8 – Ongoing fee arrangements and consent requirements 

The current provisions which require a provider of advice to give a fee disclosure statement to the client, to obtain the client's agreement to renew an ongoing fee arrangement and the client's consent to deduct advice fees should be replaced. Providers should still be required to obtain their client's consent on an annual basis to renew an ongoing fee arrangement, but they should be able to do so using a single 'consent form'. The consent form should explain the services that will be provided and the fee the adviser proposes to charge over the following 12 months. The consent form should also authorise the deduction of advice fees from the client's financial product and should be able to be relied on by the product issuer. The form should be prescribed. 

Impact on advisers

If passed, this recommendation will significantly reduce the compliance burden on advice practices. Advisers will still be required to obtain consent from clients each year to deduct ongoing advice fees and disclose the services to be provided in the following 12 months. 

The change is that product providers would no longer be required to accept the ongoing advice fees form. With different providers having different rules on the payments of ongoing fees, this is a common-sense approach.


How advisers communicate with clients

Traffic Light: Amber

Recommendation 9 – Statement of advice

The requirement to provide a statement of advice (or record of advice) should be replaced with the requirement for providers of personal advice to retail clients to maintain complete records of the advice provided and to provide written advice on request by the client. Clients should be asked whether they would like written advice before or at the time the advice is provided and a request for written advice is required to be made before, or at the time the advice is provided. 

This requirement will not apply to a person who is currently exempt from the requirement to provide statements of advice (e.g. a person who provides personal advice about general insurance products).

ASIC should provide guidance on how advice providers may comply with their record‑keeping obligations.

Traffic Light: Amber

Recommendation 10 – Financial Services Guide

Providers of personal advice should either continue to give their clients a financial services guide or make information publicly available on their website about the remuneration and any other benefits the provider receives (if any) in connection with the financial services they provide and their internal and external dispute resolution procedures (and how to access them).

Impact on advisers

Now we’re getting into controversial territory. Under this proposal, advisers would no longer be required to produce Statements or Records of Advice. Woohoo. On the face of it, this is a very important recommendation that will improve efficiency and reduce the cost of advice. The recommendation also recognises that in reality, an SOA or ROA neither demonstrates that the advice provided is appropriate or informed consent was obtained.

But…..advisers are not off the hook. It will require that advisers have contemporaneous records to demonstrate their clients have provided informed consent including the requirements under the Code of Ethics. The report also recommends that ASIC provide guidance on what these documentation requirements look like. In essence, this proposal brings financial advice into a similar framework as other professions – legal, accounting etc. 

This change is likely to be a challenge for some AFS license. There are no changes to section 912A to do all things necessary to operate efficiently, honestly and fairly.  Therefore, AFS licenses may need to review their operations, for example risk mitigation will require each AFS license to determine what form of evidence is required in advice files, and whether a short form advice document would be useful to ensure there is evidence of informed consent. Ultimately, this would be dependent on the nature, scale and complexity of the services provided by the AFS license.


Traffic Light Green

Recommendation 11 – Consent requirements for wholesale clients

The Corporations Act should be amended to require a client who meets the assets and income threshold and who has an accountant’s certificate to provide a written consent to being treated as a wholesale client. 

The written consent should contain an acknowledgment that is given before they are provided with a financial product or service that:

  • the advice provider is not required to be a relevant provider and accordingly they will not have to comply with the professional standards;
  • the advice provider will not have a duty to give good advice or to act in the best interests of the client under the Corporations Act; 
  • the advice provider is not required to give the client a product disclosure statement or financial services guide; and
  • the client will not be entitled to complain about the advice under the AFS licensee’s internal dispute resolution procedures or to AFCA. 

The existing consent requirements for sophisticated investors should be amended to require a written acknowledgement in the same terms.

Impact on advisers

Whether or not a client should be a wholesale client is contentious. Meeting a financial threshold does not mean that the client meets any form of financial literacy or capacity benchmark. This recommendation will require the client to positively consent to the implications of being a wholesale client. By inference, an adviser is held to account by informed consent.


Traffic Light: Green

Recommendation 12.1 – Design and Distribution Obligations (Distribution Requirements)

Amend the DDO distribution obligations in the Corporations Act to limit the exception to the requirement to take reasonable steps to ensure the distribution of a financial product is consistent with its target market to personal advice provided by relevant providers.

Where personal advice is provided by someone who is not a relevant provider, the AFS licensee should, like any other distributor, be required to comply with the distribution obligations and take reasonable steps to ensure the financial product is only recommended in accordance with the target market determination.

Traffic Light: Green

Recommendation 12.2 – Design and Distribution Obligations (Reporting Requirements)

Amend the DDO reporting requirements in the Corporations Act to remove the requirement for relevant providers to:

  • report significant dealings outside the target market to the product issuer;
  • comply with the additional reporting obligations specified by the product issuer in the target market determination; and
  • report to the product issuer where there have been no complaints during the specified reporting period. 

These exceptions will not apply to someone who is not a relevant provider.

All providers of personal advice (including relevant providers) will need to report the number of complaints received during a reporting period (if there have been any), as well as a description of the nature of these complaints to the product issuer.


Traffic Light: Green

Recommendation 13.1 – Benefits given by a client

Amend the conflicted remuneration provisions in the Corporations Act to explicitly provide that both monetary and non‑monetary benefits given by a client to an AFS licensee or a representative of a licensee are not conflicted remuneration.

This means that the prohibition on AFS licensees, or their representatives accepting monetary and non‑monetary benefits would only apply to benefits given by a product issuer, not to benefits given by a client.

Traffic Light: Green

Recommendation 13.2 – Client directed payments from superannuation funds

Remove the exception in section 963B(1)(d)(ii) and 963C(1)(e)(ii) of the Corporations Act and replace it with a specific exception that permits a superannuation fund trustee to pay an AFS licensee or its representative a fee for personal advice where the client directs the trustee to pay the advice fee from their superannuation account. 

Traffic Light Green

Recommendation 13.3 – Removing exceptions for benefits given by clients for issue, sales or dealings in financial products 

If the recommendation that permits benefits (monetary and non‑monetary) given by clients to an AFS licensee or a representative is accepted, the following exceptions to the conflicted remuneration provisions are no longer required and should be removed:

  • section 963B(1)(d)(i) of the Corporations Act – monetary benefits given by the client for the issue or sale of a financial product;
  • section 963C(1)(e)(i) of the Corporations Act – non‑monetary benefits given by the client for the issue or sale of a financial product; and
  • regulation 7.7A.12E of the Corporations Regulations – monetary benefits given to the provider by a retail client in relation to the provider dealing in a financial product on behalf of the client.

Traffic Light: Green

Recommendation 13.4 – Removing the exception for the issue of financial products where advice has not been provided in the previous 12 months 

  1. Remove the exception in paragraph 963B(1)(c) of the Corporations Act, which provides for monetary benefits given for the issue or sale of a financial product where the AFS licensee or representative has not given financial product advice about the product (or class of product) for at least 12 months prior to the date the benefit is given.

Traffic Light: Green

Recommendation 13.5 – Exception for agents or employees of Australian authorised deposit-taking institutions

  1. Remove the exceptions in section 963D of the Corporations Act and regulation 7.7A.12H of the Corporations Regulations for benefits given to an agent or employee of an Australian authorised deposit-taking institution for financial product advice about basic banking products, general insurance products or consumer credit insurance.

Traffic Light: Green

Recommendation 13.6 – Time‑sharing schemes

The Government should undertake a separate review of time‑sharing schemes and their distribution to determine whether the regulatory framework for time‑sharing schemes under Chapter 7 of the Corporations Act is appropriate. As part of this review, consideration should be given to whether the exception to the ban on conflicted remuneration for time‑sharing schemes should be removed.

Traffic Light: Green

Recommendation 13.7 – Life insurance

Retain the exception to the ban on conflicted remuneration for benefits given in connection with the issue or sale of a life risk insurance product. Commission and clawback rates should be maintained at the current levels (60 per cent upfront commissions and 20 per cent trailing commissions, with a 2‑year clawback).

A person who provides personal advice to retail clients in relation to life risk insurance products, who receives a commission in connection with the issue or sale of the life risk insurance product, must obtain the client’s informed consent before accepting a commission. This consent should be recorded in writing and should be obtained prior to the issue or sale of the life risk insurance product. 

In order for the client to make an informed decision, the advice provider must disclose:

  • the commission the person will receive (upfront commission and trail commission) as a per cent of the premium; and 
  • the nature of any services the adviser will provide to the client (if any) in relation to the life risk insurance product (such as claims assistance).

Consent will be one‑off and apply for the duration of the policy. 

This requirement will only apply to life risk insurance products purchased after the commencement of this recommendation.

Impact on advisers

This recommendation is to retain life insurance commissions – although the QAR did not address the commercial viability of current commission payment levels. 

Traffic Light: Green

Recommendation 13.8 – General insurance

Retain the exception to the ban on conflicted remuneration for benefits given in connection with the issue or sale of a general insurance product.

A person who provides personal advice to retail clients in relation to a general insurance product who receive a commission in connection with the issue or sale of the general insurance product, must obtain the client’s informed consent before accepting a commission. 

This consent should be recorded in writing and should be obtained prior to the issue or sale of the general insurance product. Consent is not required for any renewals of the same type of cover provided the client’s original consent applied to the commission payable on any renewed cover. 

The advice provider must disclose details of the commission the provider will receive for the issue or sale of the general insurance product (including for subsequent renewals) and any services the provider will provide to the client (if any). The disclosure of the commission amount can be set out in the form of a per cent range of the premium.

Traffic Light: Green

Recommendation 13.9 – Consumer credit insurance

Retain the exception to the ban on conflicted remuneration for benefits given in relation to consumer credit insurance. The current cap on commissions in relation to consumer credit insurance (of 20 per cent) should continue to apply.

A person who provides personal advice to retail clients in relation to consumer credit insurance who receives a commission in relation to consumer credit insurance must obtain the client’s informed consent before accepting a commission.


The industry needs change and a workable framework that delivers. What do you think? Does QAR achieve this?


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