Eradicating the Statement of Advice and the safe harbour steps are two recommendations that will help reduce red tape and make financial advice more affordable, according to the Financial Services Council.
The financial services' peak body has laid out its recommendations in a new green paper, Affordable and accessible advice, underpinned by Rice Warner and a consumer-focus group.
The FSC is calling for a simpler advice model that is consistent with the new Design and Distribution Obligations (DDO), which requires financial product issuers to know whether their consumers fall within the target market of their products.
The alternate model in line with the DDO will categorise advice into general information and personal advice. The latter is split across simple personal advice and complex personal advice. Strategic and intra-fund advice will fall under simple personal advice.
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Complex personal advice further breaks down to specialised advice.
Backing this model, the FSC said: "With many consumers receiving financial advice not understanding whether that advice is personal advice or general advice, reform of the model is needed. Almost three out of four Australians feel that simpler definitions of advice are easier to understand and most think a redefined model would be an improvement on the way the industry currently communicates."
The FSC suggests abolishing Statements of Advice (SOAs), claiming they are out of date.
In its place is the Letter of Advice, providing a substantially shortened and relevant presentation of strategies and advice to consumers.
In terms of meeting best interests duties, advisers must follow the legal process behind what is known as the "safe harbour steps".
The seven steps should be abolished, the FSC argued. They might be relevant when providing comprehensive advice, but undermines the provision of scaled, simple issue and low risk financial advice.
Instead, the code of ethics should be the primary instrument and single source of truth for determining compliance with the best interests duties.
FSC chief executive Sally Loane said the aim of the proposals is to lower the cost of providing financial advice to make it simpler for consumers to understand and access without undermining the quality of advice or eroding important consumer protections.
"The FSC is seeking industry and public feedback for our proposals in advance of finalising a policy position on a more accessible and affordable financial advice system which we will publish in a white paper later this year," it reads.
The FSC is holding consultations until July 1.