ASIC’s Quality Advice Review Tranche 1: Guide for Licensee and Financial Adviser – Integrating reform is a “good news” client story and a better business opportunity

Significant reforms under the Quality of Advice Review (QAR) Tranche 1, part of the broader Delivering Better Financial Outcomes (DBFO) package, became effective from July 2024. These changes aim to streamline financial advice processes and enhance consumer protection.

This is a “good news” story for your clients and an opportunity improve your business. We get it, you know this when it comes to working on the business is not as easy said as done. To help you we have put together these ideas to help you identify the areas where you need support to implement these changes and ways to advance your business efficiently and effectively over the next 12 months. If you have any specific questions or need further guidance, feel free to ask!

Before jumping into WHAT is required and WHEN. An excellent way to begin is with your team WHO needs to be involved in this transition process. Your team would need to consist of people in these three areas of your business:

  • Compliance
  • Client Communication
  • Operational Adjustments

Then consider your clients. Whilst the aim is for a better client experience and protection, it does not mean clients will come to this conclusion. When designing your transition process aim to proactively raise and address any misconceptions your clients may have to adapting to change. Think of it as a “good news” story, tell it the way you want your clients to hear it. Here are the most common ones:

1. Increased Costs

  • Misconception: Clients might believe that the reforms will lead to higher costs for financial advice.
  • Reality: While there may be some initial costs associated with compliance, the reforms aim to streamline processes and potentially reduce long-term costs by eliminating unneccessary fees and improving efficiency.

2. Complexity of Changes

  • Misconception: Clients may think that the changes are overly complex and difficult to understand.
  • Reality: The reforms are designed to simplify and clarify existing regulations, making it easier for both clients and advisors to navigate the financial advice landscape.

3. Impact on Service Quality

  • Misconception: Some clients might worry that the quality of financial advice will decline due to the new regulations.
  • Reality: The reforms are intended to enhance the quality of advice by ensuring greater transparency and accountability, ultimately benefiting clients.

4. Conflicted Remuneration

  • Misconception: Clients may assume that all forms of remuneration are now considered conflicted and therefore prohibited.
  • Reality: The reforms clarify and simplify the rules around conflicted remuneration, allowing certain types of commissions with standardised consent requirements.

5. Ongoing Fee Arrangements (OFAs)

  • Misconception: Clients might think that the removal of fee disclosure statements means less transparency.
  • Reality: The removal of fee disclosure statements is intended to reduce administrative burdens while maintaining transparency through other means, such as clear and consistent communication about fees.

6. Superannuation Advice Fees

  • Misconception: Clients may believe that superannuation trustees can now charge any fees they want for financial advice.
  • Reality: The reforms clarity the legal basis for charging advice fees from superannuation accounts, ensuring that these fees are reasonable and transparent.

You have your WHO team and your equipped with your “good news” story. Now start stepping our your process and implementation process.

Step for transitioning changeChallenges to considerPractical actions
1. Understanding and Interpreting New RegulationsComplexity: The new regulations are comprehensive and can be complex to understand and interpret.
Training Needs: Ensuring that all team members are adequately trained and up-to-date with the changes requires significant time and resources.
Stay Informed: Regularly review updates from ASIC and industry bodies to understand the new requirements fully.
Training and Education: Attend workshops, webinars, and training sessions to ensure you and your team are well-versed in the changes.
2. Updating Processes and SystemsSystem Overhauls: Existing systems and processes need to be updated to comply with the new requirements, which can be both time-consuming and costly.
Technology Integration: Integrating new compliance management systems with existing technology can pose technical challenges.
Compliance Checks: Conduct a thorough review of your current processes to identify areas that need adjustment.
Documentation: Update all client-facing documents, including Financial Services Guides (FSGs) and consent forms, to align with the new standards.
3. Client CommunicationClarity and Transparency: Effectively communicating the changes to clients in a manner is crucial but can be challenging.
Managing Client Expectations: Clients may have concerns or misunderstandings about how the changes will affect their financial advice fees.
Inform Clients: Clearly communicate the changes to your clients, explaining how these reforms will affect their financial advice and fees.
Educational Materials: Provide clients with easy-to-understand materials that outline the key changes and their implications.
4. Fee Structure AdjustmentsRevising Fee Arrangements: Adjusting ongoing fee arrangements (OFAs) to complying with the new standards, including the removal of fee disclosure statements, requires careful planning.
Maintaining Revenue Streams: Ensuring that changes in fee structures do not negatively impact revenue streams is a significant concern.
Review Fee Arrangements: Ensure all ongoing fee arrangements (OFAs) comply with the new regulations, including the removal of fee disclosure statements.
Transparent Pricing: Maintain transparency in your fee structures to build trust and ensure compliance.
5. Compliance and DocumentationIncreased Documentation: The need for updated and additional documentation to meet the new requirements can increase the administrative burden.
Regular Audits: Conducting regular internal audits to ensure ongoing compliance adds to the workload.
Technology Solutions: Invest in technology that can help streamline compliance and administrative tasks.
Internal Audits: Regularly conduct internal audits to ensure ongoing compliance with the new regulations.
6. Transitional ArrangementsManaging Transitions: Effectively managing the transitional arrangements, especially for non-ongoing fee arrangements, requires careful coordination.
Phased Implementation: Implementing changes in phases to minimize disruption while ensuring compliance can be challenging.
Transitional Arrangements: Take advantage of the transitional arrangements provided, ensuring all non-ongoing fee arrangements are compliant by January 10, 2025.
Phased Implementation: Implement changes in phases to manage the transition smoothly and minimize disruption to your practice.
7. Legal and Compliance CostsConsulting Costs: Engaging legal and compliance experts to navigate the new regulations can be expensive.
Ongoing Compliance Costs: Maintaining compliance with the new standards involves ongoing costs that need to be managed.
Legal and Compliance Support: Consider consulting with legal and compliance experts to navigate the complexities of the new regulations.
Industry Networks: Engage with industry networks and professional associations for support and shared insights.

Create your own month-by-month activity guide and share across your business.

July 2024Start of New Regulations: The ASIC QAR Tranche 1 reforms come into effect, including changes to ongoing fee arrangements (OFAs), fee disclosure statements (FDS), and superannuation advice fees1.
August 2024Client Communication: Begin proactive communication with clients about the changes, focusing on how the reforms will impact their financial advice and fees.
September 2024Training and Education: Ensure all team members are trained on the new regulations and understand the changes. Attend workshops and webinars for additional insights.
October 2024System Updates: Update internal systems and processes to comply with the new requirements. This includes revising documentation and integrating new compliance management tools.
November 2024Client Reviews: Conduct client reviews to ensure all ongoing fee arrangements are compliant with the new standards. Update consent forms and other necessary documentation.
December 2024Feedback and Adjustments: Gather feedback from clients and team members on the transition process. Make necessary adjustments to improve compliance and client satisfaction.
January 2024Transitional Arrangements: Ensure all non-ongoing fee arrangements are compliant by January 10, 2025. Utilize the transitional arrangements provided to manage this process smoothly1
February 2024Internal Audits: Conduct internal audits to ensure ongoing compliance with the new regulations. Address any issues identified during the audits.
March 2025Client Education: Continue educating clients about the benefits of the reforms and how they enhance the quality and transparency of financial advice.
April 2025Monitor and Review: Monitor the implementation of the reforms and review their impact on your practice. Make any necessary adjustments to ensure continued compliance and efficiency.
May 2025Prepare for Tranche 2: Stay informed about the upcoming Tranche 2 reforms and begin preparing for any additional changes that may be introduced.
June 2025Ongoing Compliance: Maintain ongoing compliance with the new regulations and continue to provide high-quality, transparent financial advice to your clients.

Key timing for Quality of Advice Review (QAR) Tranche 1

ReformCommencement timing
Advice fee deductions from Superannuation
(Part 1, Schedule 1) 
The new legislation clarifies the legal basis for superannuation trustees to charge individual members for financial advice directly from their superannuation accounts. This includes associated tax consequences under the Income Tax Assessment Act 19971.
10 January 2025
Transitional arrangements of up to 12 months apply to non-ongoing fee arrangements in force on 10 January 2025.
Ongoing fee arrangements (OFAs)
(Part 2, Schedule 1)
The requirement to provide a fee disclosure statement has been removed. Additionally, there is now more flexibility in the timing of anniversary dates for OFAs, and the mandatory content for ongoing fee consents has been amended1.
10 January 2025 for new OFAs.  
Transitional arrangements apply to OFAs in force on 10 January 2025 so that current requirements may apply for up to 150 days after the ‘transition day’, which is the anniversary of the day the OFA was entered into that occurs after 10 January 2025.
FSGs
(Part 3, Schedule 1)
The amendments provide more flexibility in how FSG requirements can be met, simplifying the process for financial planners and licensees1.
10 July 2024
Conflicted remuneration
(Part 4, Schedule 1)
The provisions governing conflicted remuneration have been simplified and clarified. New standardised consent requirements for life risk insurance, general insurance, and consumer credit insurance commissions have been introduced1.
10 July 2024
Amendment removing the conflicted remuneration exclusion for ADI employee/ agents’ remuneration commences 10 January 2025.  
Transitional arrangements apply for remuneration paid under ADI employee/ agents’ remuneration arrangements in force on 10 January 2025 until the giving of benefits under the arrangement is varied (including by the end of the arrangement).   
Consent for insurance commissions
(Part 5, Schedule 1)
10 July 2025  
Transitional arrangements of up to 12 months apply to non-ongoing fee arrangements in force as of January 10, 20251.