The Quality of Advice Review consultation paper has proposed removing the mandatory statement of advice (SOA), financial services guide (FSG) and a raft of other measures to ease the “very heavy compliance burden” facing advisers.

Advisers and life insurers have responded favourably to the paper, calling its suggestions a “step in the right direction” but consumer advocates warn it would “weaken” consumer protections.

Reviewer Michelle Levy is also recommending a broader definition of personal advice “so that it is clear it applies whenever a recommendation or opinion is provided to a client about a financial product”.

As part of the broader definition proposal, the provision of financial advice would be regulated, the consultation paper says.

In other key changes proposed, the “best interests duty” obligation would be replaced with a duty to provide “good advice” and providers of personal advice should obtain annual written consent from their client to deduct ongoing advice fees from a financial product.

“This would replace the current requirements for advisers to annually give clients a fee disclosure statement, seek their agreement to renew fee arrangements and obtain their clients' signed consent to deduct fees from financial products,” the paper says.

The Consumer Action Law Centre is against removing the “best interests duty” obligation.

“One of the six principles coming out of the [Hayne] royal commission was ‘when acting for another, act in the best interest of the other’,” CEO Gerard Brody said.

“With a history of mis-selling, upselling, and inappropriate cross-selling in the finance sector, we should not be walking back this important principle.”

Ms Levy says the proposals outlined in the consultation paper reflect the need for “substantial” changes if financial advice is going to be “widely accessible and truly affordable”.

“It is clear the current regulatory framework is a significant impediment to consumers accessing financial advice,” Ms Levy said.

“The regime does not even work well for those for whom it has been directly designed – the financial advisers and advice licensees. They have been its loudest critics.

“They have told us the regime is complex, difficult to understand and imposes a very heavy compliance burden. I agree.”

She says the proposals are intended to make it easier for consumers to access financial advice that meets their needs from a range of different providers and for advisers and financial institutions to have more helpful conversations with their customers.

“In my view this greater ease is achieved without introducing a corresponding risk of harm to consumers, who will be protected by a proposed new obligation to give good advice and by the many existing consumer protection provisions in the law,” Ms Levy said.

“Some stakeholders might be concerned that the proposals would retract hard fought changes intended to protect consumers. I do not hold that view.”

Association of Financial Advisers (AFA) CEO Phil Anderson says the consultation paper presents some very “substantial” potential changes to the financial advice regulatory regime.

“We are supportive of the recommendations that will significantly reduce the level of red tape and enable advice to be provided more efficiently,” he told insuranceNEWS.com.au.

“Ultimately, this will drive a reduction in the cost of providing financial advice, which should then make it more accessible and affordable for Australians.”

The Joint Associations Working Group, a coalition of peak bodies that also includes the AFA, says the consultation paper sets out proposals to “make it easier for consumers to have meaningful, fit-for-purpose conversations with their advice provider” while maintaining “robust” consumer protections.

MLC Life Insurance GM for Retail Distribution Partnerships Michael Downey says the paper is a “step in the right direction” as it shows there will be “meaningful” change in reducing the costs of providing advice by removing “needless” red tape while ensuring consumers are protected.

Financial Services Council CEO Blake Briggs says the proposals outline a “sensible roadmap” for delivering affordable and accessible advice by focusing on outcomes for consumers, not out-dated compliance documents and red tape.

The closing date for submissions is September 23.

Click here to access the proposals paper.